Air and Radiation EPA420-R-04-006

April 2004

Response to Comments:

Motor Vehicle and Engine

Compliance Program

Fees for: Light-Duty Vehicles;

Light-Duty Trucks;

Heavy-Duty Vehicles and

Engines; Nonroad

Engines and Motorcycles
EPA420-R-04-006

April 2004

Response to Comments:

Motor Vehicle and Engine

Compliance Program Fees for:

Light-Duty Vehicles; Light-Duty Trucks;

Heavy-Duty Vehicles and Engines;

Nonroad Engines and Motorcycles

Certification and Compliance Division

Office of Transportation and Air Quality

U.S. Environmental Protection Agency
1

Table of Contents

I. Introduction

II. List of Commenters and Abbreviations

III. Comments and Responses

SECTION 1: Legal Authority 

1.1. Authority to Assess Nonroad Fees

1.2. Authority to Recover Anticipated Costs for

Proposed Programs

1.3. Authority to Collect Fees for Manufacturers

1.4. Other Authority Issues

SECTION 2: Assessment of Costs

2.1. Costs Apportioned to Industries 

2.2. Costs Unrelated to the MVECP 

2.3. Costs for In-use Programs 

2.4. Costs Too High for Industry 

SECTION 3: Cost Study 

3.1. Number of Engine Families

3.2. Heavy-duty Highway and Nonroad Compressionignition Compliance Activities

3.3. General Cost Study Comments

SECTION 4: Automatic Adjustment of Fees 

SECTION 5: Effective Date and Application of New Fees

SECTION 6: Reduced Fees

6.1. Reduced Fee of One Percent Aggregate Retail Price

6.2. Retroactive Payment Under Reduced Fee Program

6.3. Year End Report

6.4. ICI Owner-Imported Vehicles (Not for Resale)

6.5 $300 Minimum Fee Payment

SECTION 7: ICI Issues

7.1. Fee Provisions Specific to ICIs

7.2. ICI Vehicles Imported for Resale

7.3. Modification and Test Cars

7.4. ICI Licensing

7.5. ICIs and SBREFA

SECTION 8: Other Topics 

8.1. EPA Services

8.2. Fee Payment Timing

8.3. Running Changes and Carryovers
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8.4. Refunds Less than $500 and Final Fee Payments

Less than $500

8.5. $300 Minimum Fee Payment

8.6. Reduced Costs for California-only

8.7 Fee Payment Suggestions
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I. Introduction

 On August 7, 2002, EPA published in the Federal Register

(67 FR 51402) a Notice of Proposed Rulemaking (NPRM) titled the

Motor Vehicle and Engine Compliance Program Fees for: Light-Duty

Vehicles; Light-Duty Trucks; Heavy-Duty Vehicles and Engines;

Nonroad Engines and Motorcycles. A public hearing on the proposal

was held in Ann Arbor, Michigan on September 19, 2002. The

proposal announced the opportunity for written public comment

until October 19, 2002. EPA received comments before and after

the close of the comment period. All comments were fully

addressed to the extent possible.

Complete transcripts of the public hearing and the full text

of each comment letter, along with supporting information used in

developing the regulation, are found in Docket No. OAR-2002-0023

(this docket was originally referenced as A-2001-09). The docket

is available for public viewing at the following address: EPA

Docket Center (EPA/DC), Public Reading Room, Room B102, EPA West

Building, 1301 Constitution Avenue, NW, Washington, D.C. An

electronic version of the public docket is available through EPA’s

electronic public docket and comment system, EPA Dockets. You may

use EPA Dockets at http://www.epa.gov/edocket/ to view public

comments, access the index listing of the contents of the official

public docket, and to access those documents in the public docket

that are available electronically. Once in the system, select

“search,” then key in the appropriate docket identification

number. 

EPA received several comments. A copy of each comment

letter is included in the rulemaking docket. All of the comments

have been carefully considered, and where determined to be

appropriate, changes have been made to the final regulations.

This document summarizes the written and oral comments

submitted at the public hearing and delivered to EPA during and

after the comment period.

This document is divided into eight sections. Each section

comprises issues which address the section heading or topic.

EPA published in the Notice of Proposed Rule Making (NPRM)

fees that reflected our projected test plans for the regulated

industries. In the time between the NPRM and the FRM, EPA has

gathered additional information about the programs and tests that

it plans to conduct and is in a better position to project its
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compliance programs for 2004 and beyond than it was at the time of

that the NPRM was written. As a result of an internal reassessment

of testing capabilities and requisite levels of appropriate

compliance oversight, along with comments received, EPA made

several adjustments which have resulted in a change in costs of

certificates for several industry categories. The changes are

described in detail in the preamble to the final rule, section

III, What Are the Changes Made to the Proposed Cost Analysis? The

issues are discussed more fully in the sections 2 and 3 below. 

The changes are also reflected in several new worksheets based on 

“Appendix C” which was attached to the “Motor Vehicle and Engine

Compliance Program Cost Analysis” document. Thus several new

worksheets have been generated from those originally found in

Appendix C and EPA also provides an additional description of the

changes to these worksheets. The new worksheets and description

are available in the docket for this rule and are called “Updated

Cost Analysis.”

II. List of Commenters and Abbreviations

Below is a list of commenters that submitted substantive

comments to the notice of proposed rulemaking. It is not a

complete list of the commenters. All commenters and comments

submitted are available in the above-mentioned docket.

Commenters Abbreviati

ons

Alliance of Automobile Manufacturers Alliance

Association of International Automobile

Manufacturers

AIAM

Briggs and Stratton

Echo Incorporated Echo

Engine Manufacturers Association* EMA

Motorcycle Industry Council MIC

Mercury Marine*

Outdoor Power Equipment Institute OPEI

Sierra Research SR

Vehicle Services Consulting, Inc.* VSC
5

*Organization presented oral testimony at the public hearing
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III. Comments and Responses

Section 1: Legal Authority

1.1 Authority to Assess Nonroad Fees

What We Proposed:

We proposed an update to our existing Motor Vehicle and

Engine Compliance Program (MVECP) fees regulations under which we

assess fees for highway vehicle and engine’s certification and

compliance activities. We also proposed the collection of fees

for nonroad engines certification and compliance activities which

we have regulated since our initial fees rulemaking. The “nonroad

engine category” includes: nonroad compression engines, marine

spark-ignition outboard/personal-water-craft, locomotive, small

spark-ignition, recreational vehicles (including, but not limited

to, snowmobiles, off-road motorcycles and all terrain vehicles),

recreational marine and compression-ignition engines, large sparkignition engines (over 19 kilowatts (kW)) and marine sparkignition/inboard-sterndrive engines.

Our proposal examined: the Independent Offices Appropriation

Act (IOAA), several provisions of the Clean Air Act (CAA or Act),

the Office of Management and Budget’s (OMB’s) Circular No. A-25,

and various court decisions including Engine Manufacturers

Association v. EPA, 20 F.3d 1177 (D.C. Cir. 1994) which considered

the Environmental Protection Agency’s (EPA’s or Agency’s) initial

fees rulemaking. 

We explained that section 217 of the CAA authorizes the

collection of fees for our new nonroad vehicle and engine

certification and compliance activities. Section 217 allows the

Agency to “recover reasonable costs” associated with: new vehicle

or engine certification activities conducted under section 206(a)

of the CAA, new vehicle or engine compliance monitoring and

testing under section 206(b) of the CAA (including such activities

as selective enforcement audits (SEA) and production line testing

(PLT)), and in-use vehicle or engine compliance monitoring and

testing under section 207(c) of the CAA. We also explained that

section 213 creates a statutory enforcement program which

generally mirrors that which Congress created for the regulation

of new highway vehicles and engines. We noted that EPA’s nonroad

standards created under section 213 are subject to the same

requirements (e.g., sections 206, 207, 208, and 209) and

implemented in the same manner (including certification, SEA, and

in-use testing) and under the same sections (as those referenced
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in section 217) as regulations for new highway vehicles and

engines under section 202 (with modifications to the implementing

nonroad regulations as the Administrator deems appropriate). We

then concluded that because the text of section 217 does not

specify either highway or nonroad engines and vehicles, and

because the certification and compliance activities related to

both are pursuant to sections 206 and 207, we believed collecting

fees for new nonroad vehicles and engines’ certification and

compliance activities under section 217 were appropriate as an

additional compliance requirement. 

We also stated that the IOAA creates additional and

independent authority for EPA to collect fees due to the same

special and unique benefits that manufacturers of both new highway

and nonroad vehicle and engine manufacturers receive from EPA

under the certification and compliance program.

What Commenters Said:

We received several comments that questioned our authority to

assess and collect fees for our nonroad certification and

compliance program activities. EMA argued that the IOAA neither

overrides nor provides the EPA with expanded fee assessment

authority since section 217 specifically sets out the Agency’s

authority to assess fees and also incorporates the IOAA by

reference. EMA also argued that Congress would not have enacted

the specific provisions of section 217 if the IOAA was still

intended to apply to EPA’s mobile source certification and

compliance activities.

In addition, EMA argued that since section 217 is entitled:

“Motor Vehicle Compliance Program Fees,” Congress could not have

intended that this section would authorize fees’ assessment for

nonroad compliance activities. The commenter further noted the

distinction drawn between motor vehicle and nonroad vehicle in

sections 216(2) and (11) and the omission of nonroad vehicle and

engine in section 217 even though both sections 213 and 217 were

promulgated as part of the 1990 Amendments. EMA also pointed out

that section 213(d) specifically subjects the nonroad standards to

sections 206, 207, 208 and 209 but fails to incorporate or even

mention section 217.

The Motorcycle Industry Council questioned the applicability

of section 217 to off-road motorcycles and all-terrain vehicles

(ATVs) and further urged the Agency not to assess fees until
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clarification of the Agency’s authority and issuance of applicable

emission standards for these categories.

Another commenter argued that EPA does not have the authority

under section 213 to assess fees for nonroad engines and

therefore, lacked authority to assess fees for lawn and garden

engines. This commenter also considered our discussion of our

authority to assess fees for non- road engines and vehicles as

“tortured.” 

Our Response:

EPA disagrees with these comments. EPA confirms its view

that section 217 authorizes the Agency to recover all reasonable

costs associated with certification and compliance activities for

nonroad vehicles and engines, including nonroad equipment. EPA

also believes that action taken under section 217 is to be

consistent with the IOAA. We also believe that even if section

217 does not extend to nonroad vehicles and engines, then the IOAA

separately provides the Agency with authority to assess and

recover fees for nonroad and engine certification and compliance,

and section 217 does not limit or override the IOAA.

A plain reading of section 217 indicates that EPA may recover

the costs associated with all of its vehicle and engine

certification and compliance programs conducted under sections 206

and 207 of the Act. Under section 217, the Agency may recover the

reasonable costs associated with “new vehicle or engine

certification” under section 206(a), “new vehicle or engine

compliance monitoring and testing” under section 206(b), and “inuse vehicle or engine compliance monitoring and testing” under

section 207(c). 42 U.S.C. § 7522(a). Under section 213(d), the

standards for new nonroad vehicles and engines are subject to all

the applicable requirements of sections 206 through 209. The

provisions of sections 206(a), 206(b) and 207(c) are therefore

applicable to emissions standards for nonroad engines. Here, the

nonroad certification and compliance activities for which EPA is

adopting fees are actions taken pursuant to these specific

provisions. These nonroad costs are clearly costs for “new

vehicle or engine certification” under section 206(a), “new

vehicle or engine compliance monitoring and testing” under section

206(b), and “in-use vehicle or engine compliance monitoring and

testing” under section 207(c). 

Section 217 expressly allows for recovery of costs associated

with “vehicle or engine” certification and compliance, and nonroad
 1 See, for example, section 218: “[t]he Administrator shall

promulgate regulations applicable to motor vehicle engines and

nonroad engines...” 42 USC § 7553 (emphasis added).

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vehicles and engines are clearly “vehicles” and “engines.” CAA

section 216(10), (11). The text of section 217 does not limit

its scope to “motor vehicle or engine” certification and

compliance programs. Congress was clearly aware that the terms

motor vehicle or engine are different from the terms nonroad

vehicle or engine, and in section 217 chose to use the more

general terms “vehicle” and “engine” to identify the scope of

authority under section 217. Congress defined motor vehicles and

engines distinct from nonroad vehicles and engines, but subjected

them both to sections 206(a), 206(b) and 207(c), as well as other

provisions in Title II. Congress authorized the same fundamental

certification and compliance framework for both nonroad and motor

vehicle programs, and used language in section 217 that would then

allow EPA to collect fees for its certification and compliance

costs for both motor vehicles and engines and nonroad vehicles and

engines. Congress likely would have expressly employed the term

“motor vehicle or engine,”1 instead of “vehicle” or “engine,” had

it intended to limit the reach of section 217 to motor vehicle or

engine certification and compliance activity. There also is no

specific provision in section 217 that can be read as precluding

EPA from assessing fees for nonroad engines and vehicles. 

Collecting fees to recover the certification and compliance costs

associated with nonroad engines and vehicles therefore is within

the plain meaning of the language Congress used in section 217.

Moreover, there is nothing in the legislative history for

section 217 to support the commenters’ narrow reading. Rather,

legislative history only evinces an intent for the Agency to

“recover the costs associated with operating” compliance and

certification programs. [H.R. 101-490, May 1990, 1990

U.S.C.C.A.N. 3355]. The terms used here are general in nature and

reasonably indicate an intention to recover such certification and

compliance costs. There is no indication in this text that

Congress intended to recover only some of these costs, those

associated with motor vehicles and engines. Congress likely would

have at least identified or mentioned the limitation of section

217 to motor vehicles and engines and the inapplicability to

nonroad vehicles and engines in this legislative history.

If, as the commenter suggests, EPA were to subject all

nonroad engines and vehicles to the same applicable requirements
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as on-highway vehicles and engines except for fees assessment, 

this narrow reading of section 217 would not comport with the

stated congressional intent that we “recover the costs associated

with operating” our certification and compliance programs. [H.R.

101-490, May 1990, 1990 U.S.C.C.A.N 3355]. EPA’s interpretation

avoids this result and, consistent with the intent of section 217

and the IOAA, provides a reasonable mechanism to equitably collect

fees for specific private benefits provided by the agency.

Commenters argue that Congress adopted both sections 213 and

217 in the 1990 amendments, but failed to specifically identify

nonroad certification and compliance costs in section 217, and

failed to reference section 217 in section 213(d), both indicating

that Congress did not intend to include nonroad engines and

vehicles in section 217's authority to collect fees. As noted

above, this fails to account for the plain meaning of the language

employed in section 217 and 213(d). In section 213(d), Congress

specifically stated that nonroad engines and vehicles would be

subject to the certification and compliance requirements of

section 206 and 207, along with other provisions unrelated to

fees. Congress also stated in section 217 that EPA could collect

fees for costs related to engine and vehicles subject to these

specific certification and compliance provisions in sections 206

and 207. Congress did not need to specifically mention nonroad

engines and vehicles in section 217, and did not need to

specifically mention section 217 in section 213(d) to authorize

the collection of nonroad related fees, as the language it did use

leads directly to that result. Similarly, Congress did not need

to specifically mention motor vehicles or engines in the text of

section 217 to authorize collection of fees for motor vehicle and

engine certification and compliance costs under sections 206 and

207. The reference to section 206(a), 206(b) and 207(c) brings in

both motor vehicle and nonroad related costs.

Clearly Congress could have made such specific references,

but it instead used broader language in section 217 and a specific

tie into actions under sections 206 and 207, where the plain

meaning then covers both nonroad and motor vehicles and engines. 

It did not need to specifically refer to nonroad engines and

vehicles to include them in section 217. The lack of specific

references cited by commenters does not detract from the plain

meaning of these provisions, and does not lead to the implication

drawn by commenters. The plain text of section 217, read in

combination with section 213(d), indicates that Congress intended

to authorize collection of fees for both nonroad and motor

vehicles and engines. There is no indication in the text of
 2

 “It is the sense of Congress that each service or thing of

value provided by an agency (except a mixed-ownership Government

corporation) to a person (except a person on official business of

the United States Government) is to be self-sustaining to the

extent possible.” 31 U.S.C. § 9701(a). 

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either section 217 or section 213(d) that Congress intended to

limit section 217 to motor vehicles. This is not a tortured

interpretation, but a reasonable reading of the language used by

Congress. 

The Agency also disagrees with the contention that the title

of section 217 - “Motor Vehicle Compliance Program Fees”-

indicates that Congress did not intend to authorize assessment of

fees for nonroad vehicles and engines. “Headings and titles are

not meant to take the place of the detailed provisions of the

statutory text; nor are they necessarily designed to be a

reference guide or a synopsis.” Thistlethwaite v. Dowty Woodville

Polymer, Ltd., 110 F.3d 861, 866 (2d Cir. 1997) (Internal

quotation marks and alterations omitted), rather, "[a]bsent a

clearly expressed legislative intention to the contrary,

[statutory] language must ordinarily be regarded as conclusive.” 

Consumer Product Safety Commission 447 U.S. 108, 100 S. Ct. 2055

(1980). Here, both the plain language of section 217 and it’s

legislative history indicate an intention to authorize collection

of fees for all of the new vehicle and engine certification and

compliance actions undertaken by EPA under section 206(a), (c) and

207(c). They provide no indication of an intention to limit such

authority to motor vehicles and engines. In these circumstances,

the use of the term “motor vehicle” in the heading of section 217

does not support rejecting a conclusion based on the language

actually used by Congress. 

Regardless of whether section 217 authorizes the collection

of fees for costs related to nonroad engines and vehicles, the

IOAA does authorize EPA to assess and recover fees associated with

implementing the nonroad engines and vehicles certification and

compliance programs. The plain language of the IOAA allows

Agencies to charge and recoup reasonable costs for services that

confer specific benefits upon identifiable beneficiaries2. It

authorizes federal agencies to “impose a fee only for a service

that confers a specific benefit upon an identifiable beneficiary.”

Engine Manufacturers Association (EMA) v. EPA, 20 F.3d 1177, 1180

(D.C. Cir. 1994). That case indicates that the certification and

compliance actions for which EPA is collecting fees do in fact
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confer a specific private benefit. “In a regulated industry a

certificate of approval [such as a certificate of conformity] is

deemed a benefit specific to the recipient.” Id.

There is nothing in the text of the IOAA that indicates the

IOAA does not apply to collection of nonroad related costs,

assuming section 217 does not authorize such fees. The question

then is whether section 217 itself limits the scope of the IOAA

with respect to nonroad certification and compliance costs that

are otherwise outside the scope of section 217.

Nothing in the text of section 217 indicates that it limits

the IOAA in areas not covered by section 217. The introductory

text of section 217 refers to the IOAA, stating that EPA’s action

under section 217 is to be “consistent with” the IOAA. The clear

meaning of that phrase is that EPA is to apply the criteria of the

IOAA in promulgating fees under section 217. It indicates an

intention that action taken under section 217 is to be consistent

with the IOAA. It does not indicate that Congress intended to

deviate from, limit, or override the IOAA in areas outside the

scope of section 217. 

It seems quite unlikely that Congress would limit the reach

of the IOAA in such an oblique fashion in section 217. If

Congress intended to amend or overrule the IOAA through section

217, Congress likely would have used language indicating that

intent. Instead Congress just generally provided that section 217

is to be read “consistent” with the IOAA. See, Chisom v. Roemer,

501 U.S. 380, 111 S.Ct. 2354 (1991). Such an important

limitation likely would be clearly discernable from the Act and

the legislative history of section 217, and it is not.

The enactment of section 217 even though the IOAA was already

in existence does not indicate otherwise. Section 217 serves

several valid functions, none of which is related to or indicate

an intention to limit or overrule the IOAA for areas not covered

by section 217. For example, section 217 creates the fees fund

and specifies that fees collected are to be deposited in a special

account at the United States Treasury. It also resolves any doubt

that a certification and compliance program can be basis for fees. 

The reference to the IOAA in section 217 is best read in this

context. Moreover, reading section 217 as overriding the

provisions of the IOAA would amount to a repeal by implication

which is generally disfavored.
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Commenter’s argument would mean that EPA is precluded from

recovering the costs associated with the nonroad vehicle or engine

certification and compliance program under either the IOAA or

section 217. This narrow reading of section 217, as overriding

the IOAA, would result in our conferring the specific benefits of

our certification and compliance program on non- road engine

manufacturers without the authority to recover associated costs

for providing this service. Such an interpretation would be

inconsistent with the overall purpose of the IOAA - that agencies

be “self-sustaining” by charging fees to recover costs associated

with rendering services to identifiable beneficiaries. 

Commenter’s interpretation also does not have any clearly limited

boundaries. The interpretation begs the question of the extent to

which section 217 limits the IOAA for areas outside the scope of

the IOAA. Is it limited to nonroad certification and compliance

activities? Is it limited to other activities under Title II of

the Act? Does it extend to all other EPA actions under the Act? 

The lack of a clear boundary to the limits of IOAA authority under

commenter’s interpretation indicates it is neither a likely nor

reasonable interpretation of Congressional intent underlying

section 217. 

EPA believes the best interpretation of section 217 and the

IOAA is to read them as acting in harmony and in conjunction with

each other. For areas covered by section 217, EPA’s actions under

that section are to be consistent with the IOAA. For areas not

covered by section 217, the IOAA continues to be in effect as

before section 217 was adopted. This will appropriately ensure

that fees’ assessment for all of the Agencies programs will be

adequately addressed. 

Since a nonroad engine manufacturer, similar to the onhighway engine manufacturer, “obtains a benefit from the entire

[EPA] compliance program,” we believe we may recover the

reasonable costs of compliance testing, by a fee that does not

exceed the value of the benefit derived by the manufacturer, under

the IOAA. See, EMA, 20 F.3d at 1181 (D.C. Cir. 1994). Thus, we

believe that if section 217 is inapplicable, and we do not believe

so, the IOAA would provide authority to assess fees for nonroad

engines and vehicles.

In light of the foregoing, we disagree with the commenters’

narrow interpretation of section 217. Accordingly, we believe

that it is reasonable to read section 217 as providing the

requisite authority to collect fees associated with nonroad

certification and compliance activities. EPA also believes it is
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reasonable to read the IOAA as providing independent authority for

assessment of fees for nonroad engine compliance and certification

activities, if section 217 does not authorize such assessment. 

EPA believes today’s action is appropriate under either section

217 or the IOAA. 

Similarly, with regard to comments asserting our lack of

fees’ assessment authority for other nonroad engines such as offroad motorcycles, ATVs and lawn and garden engines, we believe as

discussed above that both section 217 and the IOAA provide us with

the requisite authority to “recover the reasonable costs”

associated with the certification and compliance programs for

these nonroad engines. 

We also do not believe it necessary to further “clarify” our

authority to collect nonroad fees. We set forth the basis for our

authority within the NPRM and today’s action confirms that

authority. We separately address the suggestion to defer fees’

collection until issuance of the off-road motorcycles and ATVs

emission standards in section 1.2. below.

1.2 Authority to Recover Anticipated Costs for Proposed

Programs 

What We Proposed:

EPA published new fees for all industries in the fees rule

NPRM, Table III.D-1, 67 FR 51410. EPA updated fees for light-duty

vehicles, motorcycles and heavy-duty highway engines and vehicles

that were covered by EPA’s original fees rulemaking. The new fees

for these industries are determined considering inflationary

costs, additional costs associated with programmatic decisions,

and some future costs known at the time of the proposal that were

also known to be necessary to maintain an effective MVECP.

We also proposed fees for certain certification request types

in the nonroad industry based on the fact that EPA has had

emission regulations in place, prior to the fees proposal,

covering such nonroad industries and thus an on-going compliance

program exists for these industries. These industries include

nonroad (NR) compression-ignition (CI), marine spark-ignition (SI)

outboard/personal water craft, small nonroad SI, and locomotives. 

Some of these industries have had emissions programs in place

since the 1996 model year.
15

In addition, we proposed fees for certain nonroad industries

(marine CI > 37kW) where EPA had finalized the applicable emission

regulations for that industry prior to the fees proposal but the

compliance programs had not yet been implemented. Such industries

would only pay a fee for certification at the time of their

initial applications for certification. 

Similarly, EPA also proposed fees for certain nonroad

industries (large nonroad SI > 19kW, recreational marine > 37kW,

and recreational vehicles (off-road motorcycles (MC), ATVs,

snowmobiles, etc)) for which emission regulations had been

proposed at the time of the fees proposal (August 7, 2002) but for

which no emission regulations had yet been finalized. 

Lastly, for a certain nonroad industry (marine SI

inboard/sterndrive) we proposed fees although the emission

regulation and proposal was just under development at the time of

the fees proposal.

We explained that for those regulatory programs with proposed

but not yet finalized emissions standards and regulatory programs

with yet to be proposed emissions standards, the associated fees

would only apply after the applicable regulations became effective

or in other words, at the time a manufacturer requests

certification (67 FR at 51408). We also explained that we knew

enough of the Agency’s anticipated costs for these programs. Id.

We further explained that we did not believe our fees proposal for

these programs would prejudge the outcome of those ongoing

rulemakings. Id. We also indicated we were considering where to

finalize fees for those programs with no emissions standards. [67

FR at 51410] 

To determine our projected costs, we explained that the

Agency conducted an in-depth analysis of the costs incurred in

operating the MVECP (67 FR at 51409). We also set forth in

greater detail all of our associated direct and indirect costs in

the Cost Analysis Document, which is included in the docket of

this rulemaking.

For many of the certification request types in the “Other”

fee category, which primarily consists of nonroad groups, EPA

projected its cost based on a minimum level of effort needed to

effectively review and process certification applications and some

limited testing. It should be noted that EPA also recognized that

many of the emission regulations for these industries include the

authority to conduct other MVECP type activities beyond
16

certification but EPA chose to not charge for such activities as

none are yet envisioned by the Agency.

What Commenters Said:

EMA maintains that it is improper for EPA to quantify fees

for anticipated nonroad certification and compliance programs that

have not been implemented and in some cases not even proposed. 

EMA asserts that section 217 only authorizes the Agency to

“recover” the actual costs that it incurs for administering

established certification and compliance programs - “[T]he

Administrator may ... recover ...” EMA provides what it feels to

be the plain meaning of “recover” which is “to get back.” EMA

contends that for the industry categories noted above, there are

no such actual costs for the Agency to tally and then seek to

recover or get back. There is no proper basis for the Agency to

merely anticipate expenses that will be incurred in the future. 

EMA maintains that EPA should not impose fees for nonroad

categories that were not finalized before the NPRM, nor should

EPA include fees associated with nonroad rulemakings that have not

yet been finalized and published.

Additionally, EMA believes it is unlawful and improper to

establish fees for programs that have not even been proposed as it

presupposes the outcome of such rulemakings and so undermines and

trivializes the administrative rulemaking process. Without

knowledge of the final outcome of the predicate rulemaking the

public cannot participate meaningfully in the rulemaking. EMA

urges EPA to wait for the underlying regulatory measures to be

finalized and implemented before charging manufacturers for

anticipated costs.

The Alliance and the Association of International Automobile

Manufacturers (AIAM) state that EPA incorrectly bases its costs on

“budget requests” and “plans” rather than actual “expenditures.” 

It is inappropriate to base costs on projections. EPA should

account for “actual expenditures” or where costs have occurred. 

In addition, EPA must account for each employee who works on MVECP

activities and subtract out time not spent on such activities.

The Motorcycle Industry Council asserts that the compliance

fees should not include anticipated or projected costs, future

plans and services. The commenter further states that only when

actual costs are determined should a fair fee be established and

the costs recovered. The Council further requested that the

Agency defer finalizing fees for off-road motorcycles and ATVs
17

until the Agency finalizes the applicable emissions requirements

and at that time, issue the applicable fees or a “separate but

concurrent fee rule.”

 The Outdoor Power Equipment Institute (OPEI) supports EMA’s

comment stating that EPA lacks the statutory authority to recover

anticipated costs for proposed programs prior to their adoption as

final regulations.

Our Response:

As stated above, we believe section 217 authorizes the Agency

to recover reasonable costs associated with vehicle and engine

certification and compliance activities. We also believe that the

IOAA authorizes the Agency to recover fees. We believe it is

appropriate to recover all costs which EPA will incur to provide

the necessary MVECP services to a manufacturer during the course

of certification and in-use compliance activities. For several

reasons EPA also believes it is appropriate to collect such fees

prior to issuing certificates. EPA disagrees with EMA’s

suggestion that the language in section 217 authorizing EPA to

establish fees “to recover” all reasonable costs means that EPA

should “tally” its costs and then “get back” such costs. EMA does

not suggest that EPA change its current regulatory practice of

collecting fees in advance of granting a certificate. As such,

EMA tacitly recognizes that EPA is indeed projecting the actual

future costs associated with certification and in-use activities

at the time it is adopting the fees rule and when it collects the

fee with the application for a certificate. EPA believes it may

project actual costs as long as the fee payers are on adequate

notice through rulemaking of what those projected costs are and

that EPA has a reasonable basis for deciding that such projections

will be accurate. EPA’s fees rule is designed to recover or get

back its expected actual costs.

We believe this practice is consistent with the guidance

provided by OMB Circular No. A-25, which states under its “General

Policy” section 6(a)(2)(c) that when determining the amount of

user charges to assess that “User charges will be collected in

advance of, or simultaneously with, the rendering of services

unless appropriations and authority are provided in advance to

allow reimbursable services.” In this instance, EPA does not

believe that section 217 of the CAA limits EPA’s authority such

that EPA could only seek reimbursement of past expenses. In

addition, EPA’s continued practice of collecting fees in advance

is the most appropriate method and provides applicants with the
18

best information regarding the fees that are owed at time of

certification. 

As noted above and within the proposal, EPA has based its

costs on actual 2001 budget expenditures and then evaluated what

the same levels of effort would cost in 2003 or later. EPA is in

fact no longer “projecting” what its lab modernization costs will

be and whether it will receive necessary appropriation for the

upgrades. We have received a budget allocation in fiscal year

(FY) 2003 and plan to fully fund the test cell upgrades to make

them compliance testing ready. To some extent EPA recognizes that

it continues to project some of its actual costs. However, EPA

anticipates that it will receive the necessary budget for fiscal

year 2004 (during which time this new fees rule will now become

effective) and will spend the actual amount associated with its

“expanded programs.” Some of these expanded programs include new

certification activities which EPA must perform in order to grant

certificates to newly regulated industries. In addition EPA will

also be conducting some new certification confirmatory and in-use

testing for the heavy-duty industry. These costs and EPA’s

expected level of activities are further discussed in sections 2

and 3. EPA’s budget request to Congress includes the budget for

these new testing levels and EPA continues to believe this

expected level of activity of cost and activity is reasonable.

The Agency has finalized rules for certain nonroad categories

that were proposed but not finalized at the time this fees rule

was proposed. With the one exception noted below, we also no

longer are “projecting” what our compliance activities will be for

many of the nonroad industries included in the “Other” category as

the rules regulating emissions for those industries have been

finalized and our expected compliance activities will be

implemented.

We agree with commenters that we should not finalize fees at

this time for nonroad categories that were not proposed at the

time that the fees rule NPRM was published. Although EPA also

proposed fees for the marine SI inboard/sterndrive industry, based

on what we anticipated to be a modest compliance program, we agree

with EMA that it is premature to require fees at this time. EPA

believes that the cost study and analysis are proper for this

industry but we choose to wait until the actual emission

regulation for this industry is proposed, to provide ample

opportunity for comment on potential fees. We anticipate

finalizing fees for that industry in the final emission

regulation. Therefore, in EPA’s revised worksheet # 2, in the
19

“Other” column, we have reduced the total cost of compliance

activities by $20,645 to reflect that the marine SI category will

not be covered by this regulation. The fees associated with the

remaining regulated industries in the “Other” column remain almost

the same - $826 per certificate. This change is reflected in

section 85.2405 of the regulations, item 14 of the fees table,

which indicates the fees for marine engines, excluding inboard and

sterndrive engines.

As EPA has maintained throughout this rulemaking, we believe

it is appropriate to recover all costs which EPA will incur to

provide the necessary MVECP services to a manufacturer for

certification and in-use. For several reasons EPA also believes

it is appropriate to collect such fees prior to issuing

certificates. We also believe that when any significant budget

changes occur that affect allocations of resources dedicated to

any MVECP activity, or regulatory changes that affect MVECP

activities, or EPA evaluations of the compliance rates and

associated environmental impacts change, then it is likely

appropriate for EPA to reexamine its updated MVECP activities and

determine whether any changes in costs have occurred. 

We believe it is appropriate within this rule to require fees

for those industries that are in fact required to meet EPA’s

emission standards in order to receive certificates of conformity. 

EPA proposed fees for certain nonroad industries where the

compliance date of the emission standards had not yet occurred

(meaning no applications for certification had been submitted),

and we believe that such manufacturers had adequate notice of the

regulatory emission requirements they would be required to meet in

the future and how EPA intended to impose a fee related to EPA’s

services. Based on the regulatory structure of the emissions

program for these industries, EPA also had a reasonable basis for

deciding that the projected costs are accurate. As noted in the

proposal, EPA intends to only conduct a modest MVECP program for

these industries. 

In addition, we also believe it is appropriate to require

fees for those industries that are newly regulated since EPA

issued the fees proposal. At the time of the fees proposal such

industries (large nonroad SI > 19kW, recreational marine > 37kW,

and recreational vehicles) were on notice of the emission

requirements they would likely face (including the requirement of

certification) due to existence of NPRMs for such industries prior

to the fees proposal. Based on the regulatory structure of the

emissions program for these industries, EPA also had a reasonable
20

basis for deciding that the projected costs are accurate. The

final emission regulations have since become effective for these

industries and EPA anticipates no changes in its modest

projections of the compliance activities and costs associated with

these newly regulated industries.

1.3 Authority to Collect Fees for Manufacturers

What We Proposed:

Currently, EPA requires all manufacturers to pay fees for

certification applications. We proposed the continuation of the

fees’ requirement. We defined “manufacturer” as “all entities or

individuals requesting certification, including, but not limited

to, Original Equipment Manufacturers (OEMs), Independent

Commercial Importers (ICIs), and vehicle or engine converters.”

[67 FR 51403]. 

What Commenters Said:

Section 1.3.1. Vehicle Services Consulting (VSC) argues that

section 217 does not grant the Agency authority to assess fees for

“used vehicles,” because it references “new vehicles” and not “new

motor vehicles,” as defined in section 216. VSC further contends

that it is unclear whether all ICI motor vehicle importations are

subject to “certification” and hence to certification fees.

 VSC notes that the Agency’s certification assessment fees

authority may derive from sections 203(b)(2), 206(a), 216(1) and

217, and argues that section 203(b)(2) does not require

“certification” for ICI vehicles but instead that such vehicles be

“brought into conformity with the standards.” VSC also asserts

that in some instances, such as where there is no “resale,” an ICI

may not be a “manufacturer,” as contemplated by section 216, and

therefore should not be subject to fees.

Our Response:

As noted in EPA’s response in section 1.1 above, EPA believes

that it is appropriate to recover the costs incurred when it

provides unique and special benefits identified with a private

entity as opposed to the general public. Similarly, EPA also

believes that the costs EPA incurs to ensure that vehicles

imported in to the United States meet the requirements of the

Clean Air Act and regulations thereunder should also be recovered

both under the authority of section 217 of the CAA and the IOAA. 
 3 For example, a 1995 motor vehicle imported in 2003 by an ICI

(for resale or on behalf of current owner) is a “new motor

vehicle.” 

21

Because EPA is also guided by section 213(d) when it has

implemented emission regulations for nonroad engines and vehicles

and the enforcement scheme under section 206, 207 and 208 that are

noted in section 213(d), we have also applied the definition of

“new” in the same manner to the nonroad sector and thus believe

the requirements for certification of all imported nonroad

vehicles is the same as for motor vehicles and engines. Thus the

definition of “new” found at 40 CFR § 89.2, etc. is similar to

that at Section 216(3). 

Under section 217, EPA is authorized to assess fees for “new

vehicle” or “engine” certification and compliance activities

pursuant to section 206(a), 206(b) and 207(c). In section 216(3),

Congress defined “a new motor vehicle,” as meaning “with respect

to imported vehicles or engines, . . . a motor vehicle and engine,

respectively, manufactured after [September 25, 1987].” 42 U.S.C.

§ 7550(3).3 (Emphasis added). Sections 206(a), 206(b) and 207(c)

are applicable to “new motor vehicles” and “engines,” and as noted

above to nonroad as well. Thus, contrary to VSC’s contention,

imported vehicles and engines are subject to the provisions of 

sections 206(a), 206(b) and 207(c) and therefore, fees’ assessment

under section 217. As set forth at 40 CFR §85.1503(a), any

“...nonconforming vehicle or engine offered for importation into

the United States must be imported by an ICI who is a current

holder of a valid certificate of conformity ....” Section

85.1502(a)(3) defines a certificate of conformity as that document

issued by EPA under section 206(a) of the Act.

In addition, Congress defined a “manufacturer,” in section

216(1), as “any person engaged in. . . . importing [new motor or

nonroad] vehicles or [new motor or nonroad] engines for sale, or

who acts for and is under the control of any such person in

connection with the distribution of [such] vehicles or engines . .

. ” 42 U.S.C. § 7550(1). Thus, an ICI is a “manufacturer,” to

the extent it imports and is involved in the “distribution” of

imported vehicles in the United States. Also, EPA has

historically considered ICIs as manufacturers under section

216(1). Consequently, we have also historically considered ICIs

eligible to make certification applications. (See for example, 52

FR 36136, 36142). Further, this definition contains no exclusion

of “used vehicles” or vehicles that are not for resale. 
22

Legislative history also indicates that Congress intended Title II

to apply to all imported vehicles “whether or not new and whether

or not imported for sale or resale.” 1970 U.S.C.C.A.N. 5356, 5368. 

 Because these new imported vehicles and engines are covered by

certificates then the vehicles are also subject to the other

protections and requirements provided by the CAA including

warranty and recall, selective enforcement audits, etc. and in

this way EPA insures that such vehicles and engines do in fact

conform with the requirements of the Act as required under section

203(b).

Legislative history of section 217 also indicates that the

Agency is to “recover the costs associated with operating”

compliance and certification programs from “foreign and domestic

manufacturers.” (H.R. 101-490, May 1990, 1990 U.S.C.C.A.N. 3355). 

Clearly, Congress would have expressly limited the reach of

section 217 had it intended that imported but used vehicles not be

subject to the fee requirement. However, there is no apparent

intention to limit either our certification and compliance program

or our fees’ authority. As previously stated in section 1.1.

above, section 217 authorizes EPA to recover the costs of its

certification and compliance program activities from

manufacturers. See also, EMA, 20 F.3d 1177 (D.C. Cir 1994). 

Therefore, we believe we are authorized to recoup the costs

associated with imported vehicles and engine certification

activities from ICIs. Thus, the Agency disagrees with the

contention that section 217 does not grant EPA authority to assess

fees for certification and other compliance activities that goes

with the importation of “used vehicles.” Further, we believe that

VSC’s reading of section 217 would result in imported vehicles and

engines being subject to the certification and compliance

requirements under section 206(a), 206(b) and 207(c) but not

certification fees. Allowing such a reading would not comport

with Congressional directive that EPA recover the costs of

compliance and certification activities. 

VSC also argues that it is unclear whether imported vehicles

are subject to the certification requirements and therefore

certification fees. Section 203(a) bars the importation of motor

vehicles or engines into the United States unless covered by a

certificate of conformity issued by EPA. “[T]he importation into

the United States, of any new motor or new motor vehicle engine,

manufactured after the effective date of regulations under this

part which are applicable to such vehicle or engine unless such

vehicle or engine is covered by a certificate of conformity [is

prohibited].” 42 U.S.C. § 7522(a) (emphasis added). This section
23

expressly prohibits the importation of vehicles unless covered by

a certificate of conformity. There is no other limitation on this

prohibition that can be discerned in section 203(a).

In addition, section 206(a)(3)(A) states, in pertinent part,

that in the case of an imported vehicle or engine, “[a]

certificate of conformity may be issued only if the Administrator

determines that [a] person has established . . . that any emission

control device, system, or element of design installed on or

incorporated in such a vehicle conforms to the applicable

requirements of [section 202].” 42 U.S.C. § 7525(a)(3)(A). This

section authorizes the Agency to issue a certificate of conformity

for only imported vehicles or engines that comply with the

applicable standards prescribed under section 202. In this

section, the requirement for coverage by a certificate of

conformity for imported vehicles is also readily apparent. There

is no other specific provision in the Act that can be read as

precluding EPA from issuing a certificate of conformity for

imported vehicles and engines. Rather, the relevant provisions

indicate that imported vehicles and engines must be covered by a

certificate of conformity. Also, as previously stated above, EPA

has always considered ICIs as manufacturers and therefore,

eligible to make certification applications.

In addition, “[t]he 1970 amendments made the requirements of

Title II applicable to any imported vehicle or engine (whether or

not new and whether or not imported for sale or resale) if the

vehicle or engine was subject to the standards when manufactured

(or would have been so subject had it been manufactured for

importation).” 1970 U.S.C.C.A.N. 5356, 5368 (emphasis added). 

Therefore, all imported vehicles, “whether or not new, or imported

for sale or resale” must meet Title requirements which includes

coverage by a certificate of conformity and fees’ assessment.

Thus, even though VSC argues that applicability of the

certification requirements to imported vehicles is unclear, both

sections 203 and 206 explicitly require coverage by a certificate

of conformity of imported vehicles and engines. We believe this

requirement is clearly discernable from the plain text of these

provisions. Also, the coverage by a certificate of conformity

requirement is intended to ensure that imported vehicles meet

federal emissions standards. VSC’s contention would mean that an

imported vehicle, as compared to vehicles manufactured in the

United States, need not meet emissions standards prior to

introduction into commerce and during the useful life of the
24

vehicle. This would not be consistent with the statutory

objective to address and control mobile source emissions.

VSC further argues that section 203(b) only requires that

vehicles be “brought into conformity with the standards,” and does

not authorize EPA to require certification for ICI vehicles. 

Section 203(b) grants EPA discretion to allow importation of

nonconforming vehicles. “[T]he Secretary of the Treasury and the

Administrator may . . . provide for deferring final determination

as to admission and authorizing the delivery of a [new motor

vehicle or new motor vehicle engine offered for importation into

the United States in violation of the applicable standards] . . . 

upon such terms and conditions . . . to insure that any such

vehicle or engine will be brought into conformity with the

standards. . . .” 42 U.S.C. 7522(b)(emphasis added). This section

merely allows for our deferment of the final determination as to

admission of an imported vehicle pending the vehicle being brought

into conformity with applicable emissions standards. Bringing an

uncertified vehicle into conformity with standards includes an ICI

applying for and receiving a certificate of conformity pursuant to

section 206. Therefore, this section also does not lend support

to VSC’s contention that an issuance of a certificate of

conformity to an ICI is not required for used vehicles or imported

vehicles that are not for resale. 

Section 1.3.2. The Motorcycle Industry Counsel (MIC) contends

that there is nothing in the CAA, its legislative history, or in

EPA regulations to show that the MVECP benefits motorcycle 

manufacturers. MIC also contends that the “benefits”

manufacturers derive from EPA’s certification and compliance

program, if any, is not unlike a tariff or tax, in other words one

must pay in order to play, or receive a certificate. 

Our Response:

EPA disagrees with this comment. As stated in section 1.1.

above, section 217 authorizes the Agency to collect fees

associated with our certification and compliance activities. As

also earlier mentioned, EMA indicates that the certification and

compliance activities for which EPA is collecting fees do confer a

specific private benefit to on-highway vehicle and engine

manufacturers. Because “the [Agency’s] Compliance Program confers

a specific, private benefit upon the manufacturers, EPA can

lawfully recoup . . . the reasonable costs of the program.” EMA,

20 F. 3d at 1180. 
25

As also previously mentioned in section 1.1. above,

governmental agencies are authorized by the IOAA, to recover costs

whenever an identifiable recipient derives a benefit from services

rendered by the Agency. “A certificate of approval is deemed a

benefit specific to the recipient.” Id. Thus, MIC is wrong in

asserting that our certification and compliance activities do not

confer benefits on manufacturers and as a result that we have no

authority to collect fees for such activities.

Further, contrary to MIC’s contention, fees assessed and

recovered by a governmental agency under the IOAA, is neither a

tax nor a tariff. “It would be such a sharp break with our

traditions to conclude that Congress had bestowed on a federal

agency the taxing power that we read the [IOAA] narrowly as

authorizing not a ‘tax’ but a ‘fee.’” National Cable Television

Association, Inc., v. U.S., 415 U.S. 336, 341, 94 S.Ct. 1146,

1149. 

Section 1.3.3. EMA considers the Agency’s in-use testing for

“older model engines that are no longer produced or sold,”

improper and “gold-plating,” since manufacturers do not derive any

benefits from such engines.

Our Response:

EPA disagrees with this comment. Our emission standards

apply over the useful life of the engine. Our compliance

programs, which include certification, selective enforcement

audits and in-use testing, seek to ensure that the emission

requirements are met over the life of the engine. 

“[M]anufacturer[s] benefit[] from second and third stage

compliance testing because, . . . such testing is integral to the

regulatory scheme under which each engine or vehicle model must be

recertified annually.” EMA, 20 F.3d at 1181. Consequently, EPA

believes that manufacturers benefit from the in-use testing

requirements of the Agency’s MVECP. “[S]elective enforcement

audits and in-use compliance testing are . . . services that the

EPA renders to each manufacturer in order for the manufacturer to

comply with the Clean Air Act [and] it follows that the

manufacturer obtains a benefit from the entire compliance program

not just from the annual certification.” Id. at 1180. This

service applies whether or not the manufacturer retools an engine

model and produces a different engine for future model years.

Although EMA specifically mentioned a benefit for on-highway

vehicles, the reasoning used would also lend itself to nonroad
26

vehicles and engines. Thus, similar to highway vehicles, nonroad

vehicles and engine manufacturers also derive a benefit for the

latter phases of our certification and compliance programs.

1.4. Other Authority Issues 

What We Proposed:

Section 1.4.1. EPA’s current fees regulation at 40 CFR 86.903-93

states in part that “[n]othing in this subpart shall be construed

to limit the Administrator’s authority to require manufacturer or

confirmatory testing as provided in the Clean Air Act, including

authority to require manufacturer in-use testing as provide in

section 208 of the Clean Air Act.” In the proposal to today’s

rule the same language can be found at 40 CFR 85.2401(d).

What Commenters Said:

EMA states that the Act does not authorize EPA to compel

manufacturers to conduct in-use testing and therefore that

proposed 85.2401(d) is superfluous and should be deleted.

Our Response:

 We believe the existing language in section 208(a) of the

CAA gives EPA the authority to reasonably require certain things

in order for EPA to determine whether a manufacturer or other

person has acted or is acting in compliance with Part A and Part C

of Title II of the CAA, and regulations issued thereunder. We

also believe that nothing in today’s rulemaking in any manner

affects EPA’s authority under section 208(a) or other authority

found elsewhere within the CAA. For this reason EPA chooses to

keep the language in 85.2401(d) for the final rule.

What We Proposed:

Section 1.4.2. We proposed recovery of all costs incurred by the

Agency in conducting the MVECP. These costs included labor,

operating and program costs. (See, section III of the NPRM, (67

FR 51409) and the Cost Analysis Document, section III.A.). 

What Commenters Said:

MIC asserts that EPA may recover only the reasonable amount

to cover the appropriate portion of reasonable costs of the

services that benefit manufacturers. It then describes as too
27

liberal EPA’s interpretation of the associated costs that can be

collected for our certification and compliance activities. MIC

also states that the acquisition of real property, laboratory

facilities or equipment are cost items that are more appropriately

handled by the Congressional budget process and scrutiny.

Our Response:

Under section 217, EPA is “to recover all reasonable costs

to the Administrator associated with [the MVECP].” 42 U.S.C. §

7552(a) (emphasis added). In addition, the IOAA authorizes 

“[t]he head of each agency . . . to establish[] the charge for a

service or thing of value provided by the agency . . . based on

the costs to the government, value to the recipient, public policy

or interest served and other relevant facts.” 31 U.S.C. §

9701(b). 

We believe these provisions authorize us to recover the

reasonable costs that are associated with our activities for the

certification and compliance requirements mentioned in section

217(a). Further, in EMA, the court found that “EPA must calculate

the cost basis for the fee by allocating its direct and indirect

expenses to the smallest practical units of service.” EMA, 20 F.3d

at 1181. We consider our labor, operating and program costs that

are associated with these requirements as recoverable costs. Thus,

the costs of real property and laboratory equipment are

recoverable to the extent they are associated with the services

EPA provides to manufacturers as part of the certification and

compliance program.

 Further, OMB Circular No. A-25 (Circular), which was issued

pursuant to the IOAA, provides guidance on fees assessment for

services rendered by Agencies. It directs Agencies to ensure that

fees are sufficient to recover the “full cost” to the Government

of providing services to identifiable beneficiaries. It explains

“full cost” as including all direct and indirect costs. It also

includes physical overhead, materials and supplies, utilities,

rents or imputed rents on land, buildings, and equipment as

indirect costs. (Circular at p. 4). Therefore, we believe the

costs of acquiring real property, laboratory facilities or

equipment that are associated with the MVECP are recoverable

costs.

Section 2: Assessment of Costs

2.1 Costs Apportioned to Industries
 4

 See Cost Analysis Document starting at page 16 (step 5 of

“general steps”).

28

What We Proposed:

Our proposed fees were based on past and projected actual

costs of providing certification and compliance services to the

various mobile source manufacturers and industries. We grouped

these various manufacturers and industries into fee categories and

we explained that separation of industries into groups with other

similar industries was in order to ensure that each category pays

fees only for the services that it receives.4 We also explained

that EPA conducted a cost analysis to determine the various

compliance activities associated with each fee category and

associated annual costs for each certification request type. We

set forth our analyses in the Motor Vehicle and Engine Compliance

Program Costs Analysis (Cost Analysis Document). We further

explained that where the level and type of EPA activity and costs

were similar for each industry then those industries were grouped

together, the total number of certificates were added together,

and equal fees were allocated to each anticipated certificate.

(See Cost Analysis Document at p. 21.) In this way, EPA

determined the portion of the MVECP costs dedicated to each

certification request type.

We proposed three “fee categories”: 1. Light-Duty, which

includes light-duty vehicles and trucks, motorcycles, and because

of similar compliance programs medium-duty passenger vehicles and

certain heavy-duty vehicles were included, with subcategories

created where it was determined that a different level of services

and costs were expected to be expended; 2. Engines, which includes

heavy-duty highway (HDE HW) and nonroad compression-ignition (NR

CI) engines (excluding marine and locomotive), with subcategories

created where it was determined that a different level of services

and costs were expected to be expended; and 3. Other Engines and

Vehicles, where currently EPA only plans to do certification

review and includes marine CI and SI engines, nonroad SI engines,

locomotive engines, large spark-ignition engines, recreational

marine engines, recreational vehicles, heavy-duty engine

evaporative systems and heavy-duty engines certified for

California only . 

What Commenters Said:
 5

 EMA cites EMA v EPA, 20 F.3d 1177, 1180 (D.C. Cir. 1994) for

this proposition. The court held in this instance that “Under the

IOAA an agency may impose a fee only for a service that confer a

specific private benefit upon an identifiable beneficiary.”

29

Section 2.1.1. EMA maintains that the language of section 217(a)

of the CAA relevant to heavy-duty engine and vehicle

manufacturers, which states in part, that EPA’s fees for such

manufacturers “shall not exceed a reasonable amount to recover an

appropriate portion of [the] reasonable costs [of the MVECP]”

requires EPA to only recover a portion and not all of the

certification and compliance program costs. EMA believes such

portion should be from the costs just associated with the heavyduty engine and vehicle manufacturers. Although EMA initially

stated that they did not have a definitive percentage or portion

that EPA should assess, EMA in a subsequent comment stated that

the appropriate “portion” of EPA’s certification and compliance

costs for heavy-duty engine and vehicle manufacturers to bear is

50 percent. 

EMA states that the plain language of section 217(a) requires

that only a “portion” of the costs associated with the heavy-duty

engine (HDE) compliance program can be recoverable and thus 100

percent of such costs is not a portion. EMA suggests that EPA’s

interpretation (that heavy-duty manufacturers pay 100 percent of

the costs allocated to that industry) would provide no purpose or

effect to the last sentence in 217(a). Since the basic premise of

fee collection is to impose fees for specific benefits conferred

upon an identifiable beneficiary5, EMA suggests that it is selfevident that EPA would only collect such appropriate fee even

without the language in the last sentence. Further, EMA points to

the EMA decision and claims it does not validate EPA’s

interpretation of 217(a). EMA suggests that the dicta from that

decision only states that “Congress intended that the EPA charge

manufacturers of heavy-duty engines and vehicles something less

than it charges other manufacturers” and the EPA must “do

something that moves non-trivially in the direction that Congress

intended.” and thus does not hold that EPA may assess HDE

manufacturers 100 percent of all costs and yet still comply with

the requirement in 217(a) which requires that only a portion of

such reasonable costs be assessed.

Our Response:
30

EPA agrees with EMA’s suggestion that the general principle

of section 217 and of the IOAA is to generally recover all costs

that are specifically tied to a specific benefit for an

identifiable party. The introductory sentence on 217(a) suggests

that “all reasonable costs” might appropriately be calculated for

the all MVECP services as noted in 217(a)(1-3) for all industries

and then EPA is subsequently directed to charge the heavy-duty

engine and vehicle manufacturers its appropriate “portion” of the

otherwise aggregated costs.

We disagree with EMA’s interpretation of the EMA decision. 

The court discusses EMA’s claim that heavy-duty manufacturers

should pay less than the “fair share” of costs occurs in section

III C of the decision. The court noted that “According to EMA,

the Congress intended that heavy-duty manufacturers be charged a

fee that recovers less than their fair share of the total cost of

the Compliance Program because they face smaller sales volumes and

more onerous compliance testing than do manufactures of light-duty

vehicles and engines.” The cost methodology EPA used in the fees

rule that the court reviewed, and used for the current rule, was

to segregate the costs for each certificate type (including HDE HW

CI and SI) and divide such total costs by the number of

certificates expected to be issued within that certificate type. 

As noted on worksheet #2 of the original Cost Analysis, the total

costs for HDE HW CI and SI is $3,956,759 and cost per certificate

is $30,437. Worksheet #2 of the revised Cost Analysis shows that

this amount is now $3,193,596. The amount per certificate is

$21,578, a reduction of $8,859 per certificate in the final rule

as explained in section 2.2 (this reduction is a result in a

recalculation in the number of certificates expected to be issued,

a reduction in the costs associated with the upgrades to the test

cells in Ann Arbor, and other adjustments) whereas the fee per

light-duty vehicle certificate is $33,883.

The court in EMA (page 1183) acknowledged EPA’s methodology

of and intent to give effect to section 217(a) by segregating the

costs of heavy-duty, light-duty, and motorcycle certificates and

by waiving the fee to the extent that it exceeds one percent of

the projected sales revenue for any manufacturer. The court

suggests that it is reasonably clear that Congress intended that

the EPA charge manufacturers of heavy-duty engines and vehicles

“something less than it charges other manufacturers” although “the

statute is silent as to both the means by which and the degree to

which the agency is to do so.” The court continued and found that

what EPA had done, in segregating costs as noted above, was an
 6 EMA at 1180.

31

appropriate way to implement section 217(a) for heavy-duty

manufacturers.

We also note that the discussion that EMA cites from EMA

regarding the fact that the IOAA already provides the necessary

authority and requirement that fees for service only be collected

when a specific benefit falls upon an identifiable industry

includes additional discussion of what is an “identifiable

beneficiary” versus the general public. The court states that

“[a] general benefit conferred upon an industry, such as the

public confidence that may attend the mere facts of its

regulation, is insufficient to justify a fee.” (italics added). 

The court continues and states that “[i]n a regulated industry, a

certificate of approval is deemed a benefit specific to the

recipient.” (italics added).6 The court clearly differentiates

between the regulated industry versus the general public. 

All such manufacturers receive the specific benefit of a

certificate from EPA and are otherwise regulated. However, we

believe the language of section 217 authorizes us to use a

methodology that identifies the costs directly associated or

portioned by EPA that relate to the heavy-duty engine and vehicle

industry. We have in fact identified such costs for this industry

and apply no other costs to the fees collected from it. Since the

resulting fee levels and waiver provisions result in a fee for

heavy-duty engine manufacturers that is significantly lower than

all other motor vehicle manufacturers except for motorcycle

manufacturers and independent commercial importers (ICIs), whose

costs are segregated both from heavy-duty and general light-duty

vehicle costs, and thus EPA believes this is an appropriate way to

implement section 217(a).

What Commenters Said:

Section 2.1.2 EMA then points to section 217's use of the term

“reasonable” and legislative history on section which is to the

effect that “[t]he authority granted to the Administrator under

this section [217] must be carefully exercised so as to avoid

proceeding with ‘gold plated’ compliance programs since the costs

will not fall on the government.” (See H.R. 101-490, May 17,

1990). EMA suggests that a 50 percent allocation would also give

recognition to the tremendous outlays of capital and man-hours

that HDE manufacturers already spend to conduct extensive
 7

 Not-to-exceed requirements specify that engine emissions must

not exceed a specified value for any of the regulated pollutants.

32

certification and compliance testing and given the new costs to

comply with the 2007 model year requirements and its own in-use

not-to-exceed (NTE)7 compliance testing.

EMA believes that 50 percent is the appropriate portion of

the costs that should be collected in order to protect against

“gold-plated” programs and by ensuring that EPA maintains a

meaningful role in funding such programs. It would also recognize

the capital and man-hours that heavy-duty manufacturers spend to

stay up with EPA requirements, including costs for additional data

and new test cells in order to meet the 2007 standards. In

addition, EMA again claims that the manufacturers face extensive

in-use NTE compliance testing in the future and thus in many ways

are already paying more than their fair share of compliance cost

burden.

Our Response:

EPA believes the best interpretation of section 217 is that

the costs associated with heavy-duty manufacturers be segregated

from other types of manufacturers. In reaching this conclusion

EPA is guided by the sentence in section 217 that EMA relies upon

“In the case of heavy-duty engine and vehicle manufacturers, such

fees shall not exceed a reasonable amount to recover an

appropriate portion of such reasonable costs” and the preceding

sentence which states “The Administrator may establish for all

foreign and domestic manufacturers a fee schedule based on such

factors as the Administrator finds appropriate and equitable and

nondiscriminatory, including the number of vehicles or engines

produced under a certificate of conformity” (italics added). 

We believe it is appropriate to segregate the MVECP costs

associated with each industry and then to divide the number of

certificates within each respective industry by its segregated

costs. In order to be nondiscriminatory we also believe that all

industry groups (or “fee categories”) must reimburse the

government for all the costs for their respective industry group. 

The costs that each industry group must incur to comply with EPA’s

emission requirements such as manufacturers’ own NTE testing, test

cell development, etc., is properly considered by EPA when it

adopts such requirements, e.g. when it adopts emission standards. 

The cost to industry is taken into account in that rulemaking. 
33

This rule, however, focuses on EPA’s actions and associated costs. 

We believe that is consistent with the directive in the IOAA that

special benefit programs be self-sustaining to the extent possible

and the first sentence of section 217(a) authorizing EPA to

“...establish fees to recover all reasonable costs.”

Thus, we believe that the directive to recover “reasonable,”

“appropriate,” and “equitable and nondiscriminatory” costs or fees

means that EPA must use clear and explained accounting measures,

make reasonable estimates of costs, and properly distribute its

costs to specific programs where specific benefits are bestowed to

a specific industry group. 

Therefore, EPA believes the purposes of section 217 and IOAA

are also best served by collecting all costs incurred by the

Agency but only collecting the fair share of costs of HDE

compliance that is associated with such activity and therefore EPA

makes no adjustment of its fees based on commenters suggestions. 

EPA believes that the certification and compliance program

designed for the heavy-duty industry is appropriate and reasonably

correlates with the contribution of emissions from this sector to

the overall inventory of emissions from mobile sources and also is

very reasonable when compared to the level of activity and costs

associated with other industry categories, including the lightduty industry. As further explained in section 2.2 below, EPA

believes its certification and compliance program is reasonable,

if not modest, for the heavy-duty industry and in no respect can

it be considered a “gold-plated” program. From EPA’s original

proposed cost of $30,347 for each heavy-duty certificate we have

now reduced the cost in the final rule to $21,578. 

2.2 Costs Unrelated to the MVECP

What We Proposed:

We proposed recovery of those costs incurred by the Agency in

conducting new vehicle and engine certification, new vehicle and

engine compliance monitoring and testing and in-use vehicle or

engine compliance monitoring. The proposed fees are based on what

EPA believes to be all recoverable direct and indirect costs

associated with administering these activities. Recoverable costs 

include all labor, direct and indirect program operating costs

associated with the activities listed above, and EPA’s general

overhead costs. Operating costs include such things as the

purchase of equipment or property as that specified on worksheet
34

#10, which is the itemization of laboratory modernization budget

request.

The Cost Analysis contains worksheets which further explain

the associated costs. Several worksheets within the Cost Analysis

set forth the costs that are applicable to the heavy-duty highway

certification type.

Worksheet # 1 shows a total recoverable cost for HD HW of

$3,956,759 of which $769,448 is designated as Certification and

Compliance Division (CCD) direct program costs and $275,431 of

Laboratory Operations Division (LOD) direct program costs. 

Various costs are included within the indirect program costs

including $193,000 for lab modernization. The labor costs include

$1,404,646 of direct costs and $345,509 of indirect costs. 

Worksheet # 3 (the summary sheet for LOD which is located in Ann

Arbor) shows an additional (or projected) direct labor cost of

$224,055 and an indirect total of $249,785 for HD HW. Worksheet

#4 (the summary sheet for CCD which is located both in Ann Arbor

and DC) shows that no costs for labor are incurred in Ann Arbor

and $1,276,315 of labor costs in DC. Worksheet #7 breaks down

LOD’s additional labor needs and shows that 1.50 total full time

equivalent employees (FTEs) will be required to perform and

process tests in Ann Arbor. 

The Cost Analysis at page 33 explains the Laboratory

Modernization (Lab Mod) costs on worksheet #10. Included was a

total cost estimate of $14,130,000 of which $10,030,00 was deemed

recoverable. This recoverable portion was amortized over 10 years

for an annual recoverable cost of $1,003,000. These costs were

allocated to the light-duty and the heavy-duty highway industries

using the actual cost allocation method according to the program

for which the equipment was purchased. The “actual cost”

allocation method, as explained further at page 110 of the Cost

Analysis, is used when the costs can be directly attributable to

an industry category. For example, for the HDE HW category, EPA

attributed $193,000 per year in lab modernization costs for the

test cells associated with testing such engines. Thus worksheet

#10 breaks down the costs by various pieces of equipment and their

purpose. For example, under the Heavy-Duty Test Engine Sites

various pieces of equipment are listed, whether such equipment

will be used in test cell number 1 or number 2 (HDE #1 and HDE

#2), and whether the costs of such equipment are recoverable or

not. The total costs associate with the Lab Mod for the two

heavy-duty test cells is $3,030,000 of which EPA proposed

$1,930,000 as recoverable, and, amortized over 10 years, resulted
35

in annual cost (and proposed fee collection) of $193,000. At the

time of the proposal EPA anticipated using both test cells for

MVECP activities as well as other activities and proposed

recovering the full costs of any equipment related to MVECP

activities regardless of their potential use for non-MVECP

activities. Worksheet #3 and worksheet #1 both include the

$193,000 figure for the lab mod costs associated with the heavyduty test cells.

The core testing operations costs for LOD as noted on

worksheet #1 are further explained on worksheet #12, including a

breakdown of HDE HW costs of $275,431 of which $225,360 will be

used on engine procurement. Separate from the LOD costs for lab

modification and core testing operations costs are CCD’s programs

costs as listed on worksheet #13. These costs include “In-use

on-vehicle testing” at $297,200 and “enhanced engine compliance

programs” at $380,000. The enhanced engine compliance program

costs are further broken down in worksheet #16 including $200,000

for confirmatory testing for certification, $30,000 for selective

enforcement audits, and $150,000 for in-use engine dyno testing.

This program’s costs are discussed again and further clarified

within section 2.3.

What Commenters Said:

Section 2.2.1. In its initial comments, EMA expressed the concern

that EPA was seeking to assess and recover fees for EPA’s

developmental test lab facilities and personnel in Ann Arbor. 

EMA stated that since these facilities were not utilized in

connection with the MVECP for manufacturers’ heavy-duty on-highway

or nonroad engines compliance or certification activities but

instead are used for general regulatory efforts and technological

feasibility demonstrations, such efforts and demonstrations do not

confer specific benefits on any identifiable beneficiary or

manufacturer.

OPEI supported EMA’s comment and contended that EPA cannot

impose certification fees on small spark-ignition (SSI) engine

manufacturers for costs that are not directly related to

processing SSI engine certification. Both commenters considered

costs associated with EPA’s developmental test lab facilities and

personnel associated with such facilities in Ann Arbor, Michigan

as “unrelated costs.”

Our Response:
36

EPA agrees with commenters that fees should not be assessed

for the costs associated with using Ann Arbor’s test laboratory

facilities and personnel for activities not related to the MVECP

such as general regulatory efforts and technological feasibility

demonstrations, or for other developmental purposes. As EPA noted

in the NPRM, the costs of activities such as regulation

development, emission factor testing, air quality assessment,

support of state inspection programs and research were not

included with the costs study nor are included in the fees

proposed. (See 67 FR at 51409). As noted on revised worksheet

#10, of the $14,130,000 associated with the laboratory

modification budget, only $8,485,000 was deemed recoverable as a

laboratory equipment associated with compliance testing

activities. Specifically, those costs linked to the “advance

engine test sites” and the “climate control test facility,” which

fall under the heading “Critical Regulatory Developmental Test

Capability” are not labeled as recoverable and thus are not

included in the fees proposed. Revised worksheet #10 also

reflects that other costs associated with developmental testing

are not labeled as recoverable. As further noted below, EPA has

further refined these costs and has eliminated other costs not

determined to be MVECP related.

We did not include the costs of developmental lab facilities

and personnel in Ann Arbor in our fees calculation. The lab

facilities that were included as recoverable in the cost study are

for engine testing that EPA plans to begin in the near future. 

Therefore, the costs are associated with compliance testing and

are recoverable by fees.

What Commenters Said:

Section 2.2.2. In its initial comments, EMA also contended that

EPA does not currently conduct any HDE testing at Ann Arbor and

therefore questioned both the need for such testing along with the

additional labor costs of conducting such testing along with the

other costs of such testing as summarized on worksheet # 3.

Our Response:

Section 2.2.3 addresses the issue of whether EPA’s proposal

included sufficient information regarding whether EPA planned to

conduct HDE compliance testing in Ann Arbor. This section

addresses EMA’s concern whether EPA actually would do testing at

Ann Arbor and the need for such testing, along with an explanation
37

for why EPA believes the cost estimates associated with such

testing are reasonable.

EPA notes that the need for such testing partially arises

from purely the emission contribution from heavy-duty engines

which is second only to light-duty on-highway vehicles for mobile

sources and represents approximately one-half of the emissions of

light-duty vehicles. Furthermore, EPA has experienced a

relatively high degree of the use of defeat devices and nonconformity of heavy-duty vehicles in recent years. The discovery

of the level of noncompliance in this industry led to the

perception that EPA was not doing an adequate job of overseeing

the HDE industry. In 1998 consent decrees were entered into with

almost the entire HDE HW industry, to resolve claims of several

cases of noncompliance. The Agency is only now beginning on its

efforts to test some of these vehicles during in-use operation

over their useful lives. EMA’s comment suggests that it may be

unnecessary to implement a new HDE compliance program (or that it

is not necessary until the 2007 requirements commence), or that

such a program is untenable in Ann Arbor. EPA believes these

comments are misplaced. As noted from revised worksheet #1, EPA’s

proposed fees program allocated a cost of $3.2 million for the HDE

on-highway industry.

As also explained at section 2.2.4, EPA believes it has

developed and is now in the process of implementing a cohesive and

comprehensive compliance program, including a significant

component in Ann Arbor, for HDE on-highway engines. EMA is

correct that a testing program in Ann Arbor did not exist at the

time of the fees proposal, however, EPA has extensive experience

in testing light-duty vehicles and has identified a similar need

for heavy-duty in order to ensure that any emission problems are

found in a timely manner. Similarly, EPA has extensive experience

with procuring vehicles for testing and estimating costs and we

note that commenters did not question the accuracy of such costs. 

EPA has invested the requisite resources to conduct a testing

program in Ann Arbor and plans to use that facility along with

testing conducted in the Washington, DC area and at any necessary

outside contracted laboratories as explained at 2.2.4.

Section 2.2.3. On December 10, 2002, EPA met with EMA. At that

time, EMA once more sought an explanation of the costs attributed

to HDE testing at Ann Arbor which are reflected in LOD’s

summarized costs on worksheet #3 and the description of LOD’s core

testing operations description on worksheet #12. As explained on

page 30 of the Cost Analysis, LOD’s direct program costs include
38

the costs of testing and vehicle and engine procurement for such

tests, including those costs at worksheet #12. EMA sought

clarification of worksheet #10 (the laboratory modernization costs

for the two heavy-duty test engine sites) and how those costs were

coordinated with the LOD costs noted above and with LOD’s FTE

costs.

In response to our explanation, EMA submitted additional

comments contending there was an inadequate explanation on the HDE

testing at Ann Arbor, and more specifically the use of test cells

at Ann Arbor. EMA further contended that EPA wrongly seeks to

recover 100 percent of the costs associated with the advance

engine test cells when EPA would be utilizing, at most, only 25

percent of the cells for compliance activities. EMA stated that

only 25 percent of the costs should be assessed to reflect the

actual amount of time the dyno would be used for compliance

activities. EMA also contended that our proposal does not evince

an intent to conduct HDE testing at Ann Arbor.

Our Response

EPA’s original cost analysis for the lab modernization plan

assessed the entire cost of any equipment that would be used for

MVECP services and this plan included specifically the upgrading

of two heavy-duty engine test cells (HDE #1 and HDE #2 on

worksheet #10) and the allocation of the upgrade costs to the

heavy-duty highway industry which EMA now questions. At the time

of the proposal EPA’s intent was to use each of two test cells

approximately only 25 percent of the time for compliance activity

purposes. In their pre-modernization condition these cells were

not suitable to perform testing that could be used for compliance

or certification type activities. Since the two cells were to be

utilized for compliance activities, the lab equipment and

facilities of each test cell needed to be upgraded to deliver data

that would meet requirements for certification or recall

purposes. Since the upgrade was not necessary for the noncompliance test activities that were conducted in these test

cells, the entire costs of the test cells were included in the

fees proposal as compliance related costs.

EPA has reexamined its plans for the use of the two HDE test

cells and has determined that most compliance testing will occur

in test cell HDE #2. Although EPA had originally planned to use

both test cells, HDE #1 and HDE #2, approximately 25 percent of

the time for compliance testing, EPA has determined that it will

be using HDE #2 approximately 25 percent for compliance testing. 
39

Although it may be appropriate to assess the full costs of the

test equipment in the Ann Arbor HDE #2 (and to some extent that

equipment shared with HDE #1 that is used in HDE #2) to fees

because the equipment is necessary for EPA’s enforcement

activities, EPA has allocated the costs as noted below.

EPA is guided by the language of section 217(a) (and in

general by the IOAA) which states that the Administrator may

establish fees based on such factors as she finds appropriate and

equitable, and in this instance we find it equitable to only

prorate for that approximate percentage of the time that the

equipment related to compliance purposes will be used in

comparison to all of its uses. We believe that prorating the

costs result in more accurate costs than those presented in the

notice of proposed rulemaking. 

Most of the HDE HW testing will take place in HDE #2 test

cell which requires the additional equipment outlined on revised

worksheet #10. In cases where there was an equipment cost solely

for HDE #2, such as the heavy-duty engine cell controller

replacement, the analytical/sampling system and the selective

catalytic reduction (SCR) load controller, one-quarter of the cost

was assessed to the heavy-duty fees as this cell will be used for

compliance purposes one quarter of the time. Therefore, instead

of $1,150,000 being recovered by EPA for these pieces of equipment

as proposed, EPA will now only recover $287,500. 

In cases where there was an equipment cost common to both HDE

#1 and HDE #2, such as the diesel engine cell cooling control and

the oxides of nitrogen (NOx) and particulate matter (PM)

measurement methods and equipment, one-eighth of the cost was

assessed to determine the recoverable portion.

EPA disagrees with the comment that our proposal does not

evince an intent to conduct HDE testing at Ann Arbor. EMA also

suggests that EPA is not currently conducting any such testing in

Ann Arbor and questions the need for such testing in light of

EPA’s other enhanced compliance programs as spelled out in

worksheet #16 and because the manufacturers themselves will be

conducting their own in-use testing program. We address those

concerns in section 2.3

Our Cost Analyses Document contains extensive demonstration

of costs associated with HDE HW testing at Ann Arbor such as to

place the public on notice of our intent to conduct a heavy-duty

compliance program. For example, we defined “direct program
40

costs” as those costs for compliance work, including the costs of

testing either at EPA’s lab or a contracted test facility,

procurement of vehicles or engines and equipment needed to conduct

the tests (see page 14 of the Cost Analysis). EPA explained that

in some cases new compliance programs are being planned. We also

explained that the cost of testing (as a direct program cost) to

be performed at EPA’s lab is included in LOD’s portion of the Cost

Analysis and are not included in CCD’s portion (see page 40 of

Cost Analysis). EPA provided an explanation that within LOD

several groups exist, including the “Compliance Development and

Testing Group” and the “Advance Testing Group” and that

recoverable FTE were only from the former group as the latter

group conducts work based on developmental testing and research in

vehicle technology, thus EPA clearly differentiated between the

two and provided notice for the types of labor associated with

compliance testing at the Ann Arbor facility. (See page 44 of the

Cost Analysis). In addition, additional labor needs which would

be necessary for heavy-duty compliance testing in Ann Arbor are

reflected on worksheet #7 (now replaced by revised worksheet #7)

and explained at page 46-47 of the Cost Analysis. EPA notes that

in its revised test plan fewer FTE will be required to conduct

compliance testing in test cell #2.

We explained that the NVFEL laboratory modernization plan

includes three critical testing support areas requiring new

instrumentation and upgrades, including critical diesel engine

standards test capability (including testing to the new 2004 HDE

standards -see page 49 of the Cost Analysis). We also explained

that the “critical regulatory development” test capability is not

involved in compliance testing, and in fact the intent of the

proposal was to not charge fees for developing that capability. We

provided further information that the Ann Arbor heavy-duty engine

test sites will be required to test not only the 2007 NTE

standards but also both the current emission levels and the new

2004 model year standards (see page 50 of the Cost Analysis).

EPA also disagrees with EMA’s contention that there was no

notice of the amount of compliance testing to be conducted at the

upgraded cells since we clearly set forth the procurement cost of

HDE HW engines as a component of LOD’s core testing operations

costs, including the number of engines to be procured and at what

costs (see page 52 of the Cost Analysis).

What Commenters Said:
41

Section 2.2.4. EMA also contends that EPA’s computation of

expenses at Ann Arbor are replicated elsewhere and thus result in

“double dipping.” EMA points to the Agency costs for conducting

HDE confirmatory tests, by outside contractors, which is reflected

as $20,000 or $30,000 per engine family on worksheet #16 of the

Cost Analysis, and questions what additional

certification/compliance activity will take place at the two test

cells in Ann Arbor. In addition, EMA asserts that the use of

contractors renders EPA’s attempt to collect additional facility

and labor costs (direct program costs) for such testing improper

since EPA will not incur such costs when outside contractors are

used. 

Our Response:

The testing listed on worksheets #10 and #16 is not double

counting of the same testing but represents different sets of

testing and related costs. This testing will allow EPA to meet

its testing goals for the heavy-duty industry. See further

discussion of this in section 2.3.

The cost analysis reflects the costs associated with EPA’s

comprehensive strategy to ensure compliance and the various

components of the testing plans included within such strategy. 

EPA plans to continue with the heavy-duty screening of engines inuse by using portable emission measuring equipment that is

currently being conducted. This testing is designed to survey the

industry and to detect possible compliance issues. Independent of

this screening testing, we will also be conducting confirmatory

certification dyno-testing (and potentially in-use dyno testing to

the extent it is not conducted elsewhere, any costs estimated to

be incurred at Ann Arbor will also be incurred if testing is

conducted elsewhere) at the laboratory in Ann Arbor. This testing

will consist of both certification confirmatory testing and some

testing of in-use engines. Because of possible limitations in lab

accessibility in Ann Arbor, and as likely follow up testing to the

screening testing, we will also conduct testing at a contracted

facility. Although in many instances EPA believes that the

screening testing will provide a sufficient basis for making

compliance determinations, we also recognize the likely necessity

of continuing to test engines in laboratory conditions. This is

further explained in section 2.3.

We believe that this testing is necessary as a review of the

current testing plans indicated that the testing for the heavyduty industry lags behind the testing that is conducted on the
 8 Note that the final costs for the HDE equipment costs is

$38,500 per year, not $193,000 as proposed.

42

light-duty industry. EPA took into account the discrepancy

between the current compliance programs for the two industries,

the need for additional heavy-duty testing based on recent

noncompliance in its testing plans for the industry and on the

degree to which manufacturer run compliance activities programs

are or will be in place for these industries. The test plans

include the screening that is currently being conducted as well as

additional testing that would be conducted at the Ann Arbor

facility and testing at a contracted facility. 

2.3 Costs for In-use Programs

What We Proposed:

We proposed continuance of the Agency’s current compliance

methods for light-duty vehicles, motorcycles and heavy-duty

highway vehicles and engines which insure the overall compliance

of a vehicle or engine with applicable emission standards

throughout their useful life. EPA explained that this

certification process may include confirmatory testing (testing

conducted by EPA in-house to confirm manufacturer test data) and

compliance inspections and investigations (such as selective

enforcement audits) and in-use testing. (67 FR at 51406-51408). 

Currently, EPA conducts testing of in-use heavy-duty highway

engines and nonroad compression-ignition engines at costs of

$297,200 and $72,800, respectively as indicated on worksheet # 13. 

This testing is screening in nature, and uses portable test

equipment on-board the vehicle. This screening is used as an

indicator of engines that may be noncompliant. To assist in this

testing, EPA is planning to purchase commercial emission detection

units that can monitor emissions from heavy-duty engines and

nonroad compression-ignition engines during use at costs of

$80,000 and $20,000, respectively. These costs are shown on

worksheet #13.

We also proposed fees for new compliance testing for in-use

heavy-duty engines. Some of the testing will be conducted in the

Ann Arbor laboratory at a test site that is being upgraded to

conduct compliance-level tests. The proposed8 costs for the inuse testing conducted at EPA’s Ann Arbor facility included the

equipment costs listed in worksheet #10 ($193,000 per year for

heavy-duty), the labor listed in worksheet #7 (2.75 FTE), and the
43

cost of procuring in-use heavy-duty engines listed under Engine

Procurement - Heavy-Duty, on worksheet #12 ($225,360). 

In addition to the new testing that will be conducted in Ann

Arbor, we are planning an Enhanced Engine Compliance Program. 

Worksheet #16 reflects the costs for this program. This will be

conducted at a contracted facility (with the exception of the

selective enforcement testing) and includes certification

confirmatory testing, selective enforcement testing, and in-use

engine dyno testing for both heavy-duty highway engines and

nonroad CI engines at costs of $200,000, $30,000 and $150,000

respectively.

What Commenters Said:

EMA opposed fees based on EPA’s expectation of conducting an

enhanced in-use compliance program when, at the same time, the

Agency is in the process of developing and implementing a

manufacturer-run in-use testing program.

Section 2.3.1. EMA states that EPA’s current in-use testing is

just geared toward regulatory development and feasibility testing

of its measurement equipment. EMA further contended that the fees

are inappropriate because the NTE emissions standards and related

testing and requirements do not become effective for HDE HW

engines until 2007, much later than when the new fees become

effective, and are not yet proposed for NR CI engines. 

Our Response:

Regulatory development and feasibility testing were not

included in the cost study, and were not included in the costs

that will be recovered by fees. Furthermore, the cost study only

assesses the costs of compliance and confirmatory testing. 

EPA acknowledges that one purpose of the current in-use

testing has been developing the portable testing devices and

related testing procedures, but the primary purpose now and

certainly in the future of the enhanced engine compliance program

will be compliance testing. This is to implement the prohibition

against use of defeat devices and to conduct compliance testing of

new emission control components based on both the 2004 HDE HW

standards and the 2007 standards. Thus both our screening testing

and laboratory testing will commence in 2004 and not await the

additional requirements (such as NTE standards) in 2007. Our

current on-vehicle testing has several compliance purposes,
 9

 Not-to-exceed requirements specify that engine emissions must

not exceed a specified value for any of the regulated pollutants.

44

including: as a general screening tool to see how such vehicles

might perform based on federal test procedure (FTP) conditions, as

a tool to insure that no heavy-duty engine manufactures are

employing defeat devices. As explained below, in addition to

continuing surveillance-like testing of small samples of vehicles

per engine family, EPA plans to conduct more compliance testing to

measure the durability of new emission components and to measure

such vehicles or engines in laboratory conditions.

EPA has included the additional HDE HW compliance programs in

its cost analysis and is recovering such costs by today’s rule

because such programs are part of EPA’s plan to increase its

compliance oversight for this industry. 

We also note that the near term compliance testing will not

be for “regulatory development” purposes but rather to insure the

durability on new technologies being applied to heavy-duty onhighway and nonroad engines. These new technologies have not

undergone extensive in-use scrutiny and assurances of durability. 

As a result an in-use compliance program is necessary now to

ensure that the applicable new emission standards are being met.

What Commenters Said:

Section 2.3.2. 

 EMA states that manufacturers will be conducting a

comprehensive in-use not to exceed (NTE)9 testing program of onhighway HDE during the 2005 and 2006 time period and will

subsequently conduct a manufacturer-run in-use program. EMA

maintains that as a result, EPA and the California Air Resources

Board (CARB) will not engage in routine in-use testing of HDE

engine families. Thus, EMA argues that EPA’s in-use testing will

be minimized, not enhanced, due to the manufacturer-run in-use

testing. 

Our Response: 

EPA agrees with EMA’s comment that manufacturers will be

conducting an in-use NTE pilot testing program during 2005 and

2006 yet we disagree with EMA’s characterization of this testing

as “comprehensive.” In fact during this pilot period it is
45

expected that EPA will be required to conduct its own testing if

determination of the scope or causes of potential nonconformance

was required and that EPA may be required to generate additional

testing data should a remedial action for nonconformance be

sought. EPA also expects, and therefore agrees with EMA’s

comment, that manufacturers will be conducting their own in-use

verification testing program in 2007, and thus EPA will not be

conducting routine testing that is duplicative of manufacturer

testing. Independent from the manufacturers’ testing throughout

this time period, EPA sees the need to conduct the projected

levels in-use testing to ensure compliance with all emission

standards, including NTE standards. EPA believes that an EPA-run

in-use presence will continue into the future at the levels

projected. 

The enhanced in-use program is planned by EPA to address the

Agency’s compliance testing needs. New technologies, such as

catalysts and traps, will soon be added to heavy-duty on-highway

(both for the 2004 and 2007 regulatory requirements) and nonroad

compression-ignition engines which have not undergone extensive

in-use scrutiny and assurances of durability. Thus we believe it

is appropriate to establish an in-use compliance presence to

ensure that the applicable new emission standards are being met. 

In terms of equity with other industries and in terms of the need

for the compliance programs, we believe that EPA’s proposed

compliance program and the associated fees are appropriate. In

addition, as noted above, EPA’s in-use testing will not be

duplicative, but as envisioned by EPA’s settlement agreement with

EMA, EPA’s testing will be used for purposes of verifying any

manufacturer testing as necessary in order to make final

compliance determinations and other separate testing to supplement

the testing of engine families not tested by manufacturers.

As evidence of EPA’s intent to conduct the current and future

HDE HW and NR CI testing programs, EPA has formally requested an

additional $8 million in the fiscal year 2004 budget request sent

to Congress “to help ensure compliance with the more stringent and

complex Tier II and Diesel regulations for cars, heavy-duty diesel

engines, and gasoline and diesel fuels that will take effect in FY

2004.” Included in the request is the “development of a credible

heavy-duty compliance program” as Congress has previously

questioned EPA’s oversight of this industry. We believe it is

appropriate to include the new testing program costs associated

with heavy-duty compliance in the budget request just as it was

appropriate to include the $10 million associated with the

recoverable portion of the $14 million spent on the laboratory
46

modernization projections which, at the time, was based on both

EPA’s design plans and needs and a similar request to Congress for

such funding which has since been funded in subsequent

appropriations. We also note that much of the testing that will

be conducted during the 2005-2006 pilot testing period will be for

purposes of refining testing protocols, etc. and that EPA must

maintain a reasonable level of compliance testing in order to

ensure that emission standards are being met while vehicles are

operating during their useful lives. Similar to EPA’s in-use

verification program conducted by manufacturers in the light-duty

industry (the Compliance Assurance Program (CAP 2000)), EPA

believes it will continue to test at projected levels beyond 2007

when manufacturers will be expected to be required to conduct

their own in-use testing as EPA testing in conjunction with

manufacturer testing forms the basis for adequately determining

the performance of engines during in-use operation.

What Commenters Said:

Section 2.3.3. The Alliance/AIAM maintains that since CAP 2000

transferred the obligation of in-use verification and confirmatory

testing to manufacturers, EPA appears to be charging fees for

costs that are already borne by manufacturers. They also cite to

a statement regarding our authority to require SEA testing in the

NPRM and contend that since CAP 2000 also reduced or transferred

EPA’s workload as it relates to SEA testing, that any costs

associated with SEA testing is inappropriate.

Our Response:

Although the Alliance/AIAM maintains that CAP 2000

transferred the obligation of in-use verification and confirmatory

testing to manufacturers, in fact what CAP 2000 accomplished was

the shift in emphasis that had been placed on certification to inuse performance and in-use testing. EPA neither transferred nor

intended to transfer EPA’s own in-use verification and

confirmatory testing to the manufacturers. Rather, after CAP 2000

was implemented, EPA began gradually increasing the amount of inuse testing that it was conducting, initially at the Virginia test

laboratory (VTL) in Alexandria, Virginia, then transferred this

testing (during the time when testing at VTL was being phased out)

to EPA’s Ann Arbor laboratory where the in-use testing program

continues to operate and increase in scope. The costs of the inuse testing program reflects our implementation of the new Tier 2

emission standards and associated new technology. 
47

 We did not propose any fees for SEA testing for the lightduty program, therefore, the Cost Analysis Document does not

reflect any light-duty costs for SEA testing. However, this does

not preclude EPA from increasing its in-use testing program or

conducting SEA testing if it deems it necessary in the future. 

Any related fee change would be through Notice and Comment

rulemaking.

What Commenters Said:

Section 2.3.4. EMA indicated that EPA should readdress the

assessment of fees for in-use testing once the manufacturer-run

program is up and running. EMA also stated that by the time EPA

conducts a new rulemaking for HDE fees, the HDE manufacturers will

have been making “double payments.” 

Our Response:

As noted above in section 2.3.2, EPA believes that its

initial modest compliance program that has been designed for the

HDE industry, and for which costs will be recovered by today’s

rulemaking, is appropriate and is expected to continue for the

foreseeable future. The Agency recognizes the significant role

the HDE manufacturers will play in contributing to a comprehensive

compliance program by conducting their own in-use testing. As

such EPA anticipates that it may re-examine the scope of its own

HDE HW in-use compliance program and its effectiveness at a time

when its new program is fully developed and can also be examined

in the context of a mature manufacturer-run in-use program. This

reexamination will focus on whether the manufacturer in-use

testing program as finally adopted and implemented indicates that

changes are appropriate in the nature or extent of EPA testing. 

EPA will examine the scope of manufacturer-run testing and

determine whether any redundant or unnecessary in-use testing is

being done by EPA or whether additional EPA testing is required. 

EPA believes that this will timely address the concern of “double

payments,” in order to avoid manufacturers paying for testing that

they are conducting and also paying fees for EPA to conduct the

same testing.

2.4 Costs Too High for Industry

What We Proposed:
48

As earlier mentioned in section 2.1, the Cost Analysis

Document contains EPA’s in-depth analysis of the recoverable costs

associated with running the MVECP.

We explained that each request for a certificate of

conformity within a certification request type is potentially

subject to an equal amount of EPA expenditure related to the

applicable certification, SEA, and in-use compliance monitoring

and audit programs, and where applicable, fuel economy. EPA

believes it is fair and equitable to calculate fees in a manner

whereby the fee for each certificate within a certification

request type is approximately the same. 

The Cost Analysis divided the various affected industries

into three separate categories, light-duty vehicles, heavy-duty

and nonroad compression-ignition engines and “Other.” Each

category was further subdivided if the amount of testing or EPA

services varied significantly. The “Other” category was not

subdivided as it included vehicles and engines that would only

receive certification review and some minimal testing. The fees

were determined by dividing the total costs of services provided

by EPA to this category by the projected number of certificate

applications that would be received by manufacturers included in

the category.

What Commenters Said:

Section 2.4.1. Mercury Marine opposed the fee structure for

marine engine manufacturers. It asserted that EPA’s proposed fee

of $827 per certificate would have a 2003 model year impact to

Mercury Marine of over $23,000.

Mercury Marine stated that the marine industry agreed to

redesign its products to meet EPA regulations in 1994 and 1995. 

They noted that the cost of this redesign is in excess of 500

million dollars industry wide. Mercury stated that the

discussions at that time certainly did not include any additional

costs for certification.

Mercury Marine stated that the marine industry is sensitive

to changing costs and is unable to deal with the fees that EPA

proposed.

Our Response:
49

As mentioned above, both section 217 and the IOAA direct EPA

to recover fees associated with the various engine and vehicle

certification and compliance programs. Today’s rulemaking is in

compliance with the strictures of both provisions. Industries

that have not had to pay fees until now will be charged fees to

cover the services provided by the EPA. EPA understands that the

new fees are an expense that many manufacturers have not had to

pay and that this expense may be difficult to budget into a

manufacturer’s expenses. This is why EPA notified manufacturers

of the new fees early in the rulemaking process to give

manufacturers time to budget for the new fees.

 To reduce their fees burden, EPA included liberal waiver

provisions for small engine families to assure manufacturers that

the cost of fees will never exceed one percent of the projected

aggregate retail value of the vehicle or engines being certified. 

It should be noted that when a fee is reduced the cost of the

compliance services are covered by the government and are not

distributed among other fee payers.

Although we did not mention certification fees as part of the

marine engines rulemaking, we believe that we have given adequate

notice of the new fees in order for manufacturers to prepare for

the new fees. Furthermore, since 1992 light-duty vehicle and

heavy-duty engine manufacturers have been paying fees. Thus, we

also believe that the new fees schedule will ensure the equitable

treatment of all manufacturers that are certified by EPA.

What Commenters Said: 

Section 2.4.2. Briggs and Stratton stated that small engine

applications are simple and straightforward, they require a

minimum amount of review by EPA, there is no OBD II, fleet

averaging, etc. Therefore, only a minimum fee should be set for

certification, lower than those in the “Other” fee category. 

Because manufacturers of the small engine industry have a larger

number of smaller engine families and the engines are of a low

cost then this provides an additional justification for lower

fees.

Outdoor Power Equipment Institute (OPEI) suggested that lawn

and garden engines should be treated differently than the other

engines and vehicles in EPA’s category for “other engines.” OPEI

asserted that EPA took the position that it incurs the same

expense, whether processing a certificate for a very complex

locomotive engine, or an engine used to power a hedge trimmer. 
50

Furthermore, OPEI comments that although it is not familiar with

the intricacies of locomotive engine design and usage, EPA cannot

possibly spend the same amount of time certifying a locomotive

engines as a lawn and garden engine.

Our Response:

To reflect the services we provide to industries within a

category (see worksheet #2 for the categories “LDV and Highway

Motorcycles,” HDE Highway and Nonroad CI,” and “Other”) in some

instances we further subcategorized the fee categories. In

addition to assessing the time that may be spent reviewing

certification applications within a category or subcategory, we

also assessed whether the applicable industry type would receive a

similar level of compliance testing and associated costs. The

goal of this is to develop subcategories that are expected to

receive similar compliance activity and related costs. EPA’s cost

analysis for the fees rule divided categories into subcategories

whenever there was a substantial difference between the level of

services given to a subcategory. For example, EPA conducts precertification testing and in-use testing for light-duty vehicle

and trucks. Conversely, EPA plans to conduct much less motorcycle

testing within that same category. Therefore, the fees for the

motorcycles are less than the light-duty vehicle and light-duty

truck fees. EPA plans, for the industries in the “Other”

category, to conduct the same level of effort for certification

review and also plans only a minimal amount of testing. Testing

is a major cost that separates subcategories and is not a

significant cost for this category. Therefore, the industries in

the “Other” category remained grouped together.

The certification information submitted by the individual

industries largely consists of test data, descriptions of engines

or vehicles in the engine family, and forms indicating the

standards that the vehicles or engines meet. This information

does not vary significantly whether the engines are large and

complex or small and less complex. Certification review of all

industries in the “Other” category consists of a review of the

information that the manufacturer submits. The review includes

determining that the engine or vehicle is being certified in the

correct certification category, that the certification tests were

conducted on the worst case engine or vehicle, that the forms were

filled out correctly, and that the vehicle or engine meets EPA’s

emission standards. In this respect, all of the certificate

applications submitted by the industries included in the “Other”

category are the same. 
51

In the course of EPA’s review of certification applications,

certain items may be reviewed more closely for one application

than for another application, items such as defeat devices,

auxiliary control devices or new technology. EPA decides whether

these items should be reviewed depending upon the history of the

industry, the manufacturer and other factors. Although the level

of review of these items may change the total time spent on an

individual or an industry’s applications, the difference is not

significant and does not merit a separate subcategory. 

Furthermore, other factors such as assisting new manufactures and

reviewing incomplete applications require more time than the

average difference in review time for industries’ applications. 

For these reasons, EPA decided that the applications in the

“Other” category are provided basically the same review and

testing services and, therefore, should be assessed the same fee.

What Commenters Said: 

Section 2.4.3. OPEI stated that EPA had an overly simplistic

arithmetic system of evenly dividing the certification costs

between such disparate industries (as locomotive and trimmers) and

OPEI finds this inappropriate and inequitable. OPEI asserted

that, using the figures generated by EPA, more than half (546) of

the 1,027 engine families in the Other Industries category are

lawn and garden engines. In addition, OPEI stated that the simple

arithmetic used by EPA results in unfairly loading the “lion’s

share” of the certification costs onto a single industry which

should only be responsible for its own share of certification

costs.

Our Response:

As described in 2.4.2 above, EPA divided the costs attributed

to the services provided to the “Other” category by the number of

projected certification applications from the industries included

in this category since each application entails approximately the

same amount of review or effort by the Agency. Regardless of the

disparity of the applications, the amount of time spent on

locomotive applications and trimmer applications will be about the

same. 

The projected number of applications for the lawn and garden

industry constitutes more than half of the applications that will

be received and processed by the Agency. Over half of resources

that EPA spends on the “Other” category will be spent on lawn and

garden engines. For this reason, we believe it is appropriate,
52

equitable and nondiscriminatory for the lawn and garden industry

to pay more than half of the costs for the “Other” category. 

What Commenters Said:

Section 2.4.4. OPEI and ECHO stated that there are a lot of small

business in the lawn and garden engine industry and these

businesses may be unable to absorb fees costs as easily as other

industries. OPEI suggested that certification fees for lawn and

garden engines be set at no more than $300 as this would take into

account the industries’ razor-thin profit margin. OPEI further

stated that most certificate applications are carried over from

year to year which, OPEI suggests, costs EPA a fraction to process

relative to a new certification application. 

Our Response:

EPA does recognize that in some cases the full fee for

certification may present an unreasonable burden and established a

reduced fee to provide relief to manufacturers of smaller engine

families. The reduced fee provision should help small business

that certify smaller engine families for a limited market. 

Therefore, EPA does not see fit to reduce the fee for the lawn and

garden industry to $300.

For EPA’s response to the relative cost of carryover

applications, see section 8.3 below.

What Commenters Said:

Section 2.4.5. The Motorcycle Industry Council stated that the

proposed motorcycle testing is adequately funded by the Agency’s

existing fee and that even considering inflation, EPA’s increased

costs would not equal the proposed fee.

Our Response:

EPA’s future plans for motorcycle compliance include more

that the certification screening testing that is being conducted

today. Worksheet #13 in the Cost Analysis includes an in-use

motorcycle compliance program which includes the costs of

motorcycle procurement, testing and computer support. The cost of

the proposed motorcycle compliance program is $118,400. The

motorcycle fees include this cost as well as the costs of the

labor, certification and other services all outlined in the Cost

Analysis that are dedicated to the motorcycle industry.
53

Section 3: Cost Study

3.1 Number of Engine Families

What We Proposed:

As previously mentioned in section 2.1, we grouped industries

into three fee categories (industry groups):1) Light-Duty,

consisting of light-duty vehicles and highway motorcycles; 2)

Engines, consisting of heavy-duty highway and nonroad compressionignition engines; and 3) “Other”, which contains other vehicles

and engines. We proposed a fee schedule based upon the

recoverable costs for each certificate type under each fee

category and the number of known and projected certificates issued

annually for that certificate type. We then divided our

recoverable costs by the number of certificates expected to be

issued to manufacturers within that certification request type. 

Thus, for example, in the proposal we determined the recoverable

costs for the nonroad CI industry as $1,300,155 and the number of

certificates issued as 603 and the resulting fee is $2,156.

(Worksheet #2 of the revised Cost Analysis available in Docket

OAR-2002-0023 updated the cost for the nonroad CI industry to

$1,205,895, number of certificates to 662 and the resulting fee

for that industry is $1,822.)

We determined the number of certificates expected to be

issued by examining EPA’s certification database. For currently

active certification programs, we listed the number of

certificates based on the latest information at the time of the

proposal which was for the 2001 model year (67 FR at 51406). For

other newly regulated industries for which certificates have not

yet been issued, we projected the number of certificates based on

discussions with manufacturers and information presented to EPA

during the emission standards rulemakings for such industries. Id.

What Commenters Said:

Section 3.1.1. EMA states that EPA significantly understated the

number of HDE on-highway and nonroad CI engine certificates that

are issued annually which resulted in an overstatement of the fees

that should be allocated to each certificate. EMA stated that in

2001, we issued 159 HDE HW and 661 nonroad CI certificates. EMA

also asked for an explanation as to why more current years and

certification data should not be used since that would be more

reflective of the increase in engine families.
54

The Alliance/AIAM stated that the Agency did not provide an

explanation for the estimated number of certification requests

used in calculating the fees. The Alliance/AIAM expresses concern

that the number of light-duty certificates appears to be based on

CAP 2000 assumptions; assumptions that they maintain have not

materialized. In addition, they contended that EPA’s Tier 2 and

heavy-duty regulations, as well as CARB’s low emission vehicle

(LEV II) regulation, will likely result in creation of more

certification requests than projected and lead to collection of

more fees by EPA. As a result, EPA may collect more fees than it

is entitled to if it receives more certification requests than

projected. 

The Alliance/AIAM submitted further comment that they

expected 35 additional certificates to be issued for light-duty

vehicles for model year (MY) 2004 and that the number of

certificates would either remain the same or increase as a result

of Tier 2. The Alliance/AIAM was hesitant to predict the effect

of the CAP 2000 rule on the number of certificate requests.

The Alliance/AIAM suggests that EPA should base its fee

calculation on the most current number of issued certificates. 

Because this number may fluctuate and because it may be difficult

to project future certification trends, they suggest that EPA keep

track of the trends and assess a fee based on the average taken

from several years. Lastly, they suggest that this process be

done by rulemaking to prevent EPA collecting more fees than

appropriate. 

Our Response:

EPA’s intention throughout this rulemaking process is to

determine with a reasonable level of certainty the recoverable

costs of implementing its MVECP and assessing fees per certificate

to cover such costs. Thus, we agree with the comment that we

should use the most current and accurate number of issued

certificates. However, EPA does not agree with the comments of

EMA that the number of certificates used in the cost determination

should remain the same regardless of the impact on fees collected. 

Simply put, EPA believes it should only recover what it

anticipates to be its actual costs and should devise a reasonable

system in order to charge a fee that most closely matches its

final actual costs and final number of certificates to be issued

in a given year. As explained below, EPA is including a “rolling

average” formula to be applied in 2006 and thereafter in order to
55

more accurately reflect the number of certificates issued each

year and the corresponding fee that is owed per certificate.

 

In light of the comments that we received, EPA gathered

information regarding the number of certificates for HDE HW,

nonroad CI, and light-duty vehicles and trucks, motorcycles and

ICIs from several databases, and reexamined its certification

numbers for the last three years, 2000, 2001 and 2002 which

comprise EPA’s most recent and complete information. 

Using an average of the past two years of the most recent

complete certification information (2001 and 2002) we determined

the average number of certificates for HDE HW, nonroad CI, and

light-duty vehicles and trucks certification request types. For

the other types EPA saw no need to reexamine its projected number

of certificates nor did EPA receive any comment. For the lightduty vehicles and truck category we have chosen to keep the number

405 as used in the proposal. Although the actual average is 382

for the 2001 and 2002 model years, we believe it is likely that

there will be at least a modest increase in the number of lightduty vehicle and truck certificates given the complexity of Tier 2

standards. In addition, information submitted by the

Alliance/AIAM states that the number of additional certificates

for 2004 may be as high as 35. This would bring our projection to

417 for 2004. However, this is a projection and we do not have

complete confidence in this number. Therefore, we have decided to

retain the proposed 405 certificates in the final rule.

For the HDE HW category we have determined, based on a reexamination of our database and discussions with representatives

from EMA, that 148 certificates is a more accurate projection,

rather than the 130 in the proposal. This will result in a

reduction of fees for such certificates. For NR CI we have also

revised the number slightly upward to reflect a more accurate

projection of 662 rather than the proposed. We have re-calculated

the fees amount for each of these categories and the change is

included in the new fees shown in the table in new revised

worksheet # 2 of the Revised Cost Analysis available in Docket

OAR-2002-0023 and at 40 CFR §85.2405(a).

Although at this time, EPA believes there is enough

certainty with regard to the total recoverable costs in future

model years, EPA recognizes that the number of issued certificates

“divisor” needs to be adjusted periodically in order to ensure

that we only collect the appropriate fee. Therefore, we agree

with the suggestion, made by the Alliance/AIAM, that EPA monitor
56

the number of certificates issued each year and collect a fee

based on the most recent information and an average of several

years. However, we do not believe that rulemaking is necessary

each time the Agency seeks to adjust fees based on the number of

issued certificates. Therefore, in this rule, we are setting

forth the methodology by which future calculations will be made,

based on clearly defined criteria. EPA also recognizes that the

industry needs to know the applicable fee in advance of the

effective date. Therefore, by today’s rulemaking, EPA is

implementing a fee applicable to each certification request type

that is applicable from the effective date of the regulation

through the 2005 calendar year. Starting in calendar year 2006,

and each subsequent year, EPA will adjust its fees based on both

changes to the average number of certificates issued from the

prior two model year period (for calendar 2006, model years 2003

and 2004 are considered) and an inflation adjustment factor. The

inflation adjustment factor is discussed in section 4 below. 

By example, for any certificate received in the 2006 or later

calendar year the fee will be adjusted from the fee applicable to

the previous calendar year. Using 2006 calendar year as an

example, in January 2005 EPA will examine the number of

certificates issued for each certification request type in the

2003 and 2004 model years, average the two years, and then divide

this new number into the fee base established by today’s rule. 

The fee base will be adjusted by the inflation factor before it is

divided by the new certificates number. In January 2006, EPA will

perform the same task for any certificate submitted in the 2007

calendar year, and so on. EPA will publish the new fees each year

in a Dear Manufacturer letter or by similar means. The “Dear

Manufacturer” letters are also located on EPA’s website:

http://www.epa.gov/otaq/cert/dearmfr/dearmfr.htm. The new fees

will also be located on EPA’s Fees website:

http://www.epa.gov/otaq/fees.htm. See section 4, below, for a

further discussion of how this annual adjustment regarding the

number of certificates will be made for each certification request

type, including those for nonroad industries in the “Other”

category.

What Commenters Said:

Section 3.1.2. EMA stated that we should use the number of

certificates issued in 2001 since we also used 2001 fiscal year as

the starting point for determining activities and costs assessable

against HDE manufacturers. EMA further stated that there should

be no future automatic adjustments for certification fees based on
57

whether the number of issued certificates varies from year to year

in the future. Since a single base year was chosen as a

foundation for the Agency’s cost calculations, the marginal cost

of each certificate should remain similarly fixed based on the

number of issued certificates in that same base year. Otherwise,

the entire cost calculations would have to be redone based not

only on future numbers of annual certificates but also on future

year budgets and activity allocations. EMA maintains that if more

certificates are issued in one year than another, more fees will

be received and if less certificates then less fees and that such

an outcome is appropriate.

Our Response:

EPA disagrees that a single base year and the number of

certificates issued that year should be chosen as a foundation of

the fees cost calculation. The two basic components of

certification fees are labor and testing costs. These costs will

not vary each year as a result of the number of certificates that

are issued because EPA will conduct the same number of tests that

are outlined in the cost analysis and, furthermore, the same

number of FTE will be dedicated to certification review and

testing. The FTE will adjust the amount of time spent on each

application to the number of applications submitted. Because EPA

will be providing the same services it is important for EPA to

collect the same amount of fees each year.

EPA will be adjusting the fees annually to reflect the change

in the cost of labor as is discussed in section 4. The costs of

testing and the indirect costs of testing and labor may also

change, most likely increase with inflation, but because some of

the costs are fixed by contract and because the cost changes are

more difficult to determine each year, EPA will not change the

fees based upon the changes to these costs.

3.2 Heavy-duty Highway and Nonroad Compression-ignition

Compliance Activities

What We Proposed:

The Cost Analysis, on worksheet #16, included the projected

costs for an enhanced engine compliance program that EPA will

implement for heavy-duty highway and nonroad compression-ignition

engines. It includes confirmatory testing for certification,

selective enforcement audits and in-use dyno testing programs. We

determined the costs by using contractor prices. 
58

What Commenters Said:

Section 3.2.1. EMA described the costs of enhanced testing shown

on worksheet #16 as objectionable and improper because EPA has

chosen to not implement such programs in the past presumably

because it did not see a priority or clear benefit; nevertheless

EPA now chooses to do so at the manufacturers’ expense. As a

result, the commenter further asserted that EPA must demonstrate

the need and cost-effectiveness of these new programs since it is

now the manufacturers and not EPA that will bear the expense.

Our Response:

EPA, in planning for the future, determined that the amount

of compliance oversight devoted to the heavy-duty industry has

been less than that devoted to the light-duty industry. As part

of the Agency’s plan to increase compliance oversight for this

industry, we intend to implement additional HDE HW and NR CI

compliance programs and the costs of these programs are included

in the Cost Analysis Document. The procurement of in-use HDE HW

engines is included on worksheet # 12 and the enhanced engine

compliance program is outlined in worksheet #16. 

Please note that EPA reassessed its testing plans from those

set forth in the notice of proposed rulemaking to a level that is

more representative of the amount of testing that may be

accomplished with the new testing facility in Ann Arbor and the

new enhanced engine compliance program testing that will be

conducted at a contractor’s facility. EPA has used the

information on resources and lab capabilities to make the changes

and, therefore, the current rulemaking more accurately represents

the test program that EPA will put into place. The changes are

discussed more fully in the Final Rulemaking, section III.B. 

Revised worksheets in the updated Cost Analysis reflect the new

costs of the revised testing plan.

The additional compliance activities, the in-use tests that

will be conducted at NVFEL and those outlined on revised worksheet

# 16 that will be performed by a contractor at a contracted

facility, will begin to level the playing field between the lightduty vehicle and engines industries. Furthermore, recent events

including new emission standards and concerns about prior

noncompliance with existing standards have caused EPA to want to

increase the oversight devoted to this industry. New standards

start in 2004 and 2007 for HDE HW and call for use of types of

emission control technology not previously used on these engines. 
59

In 1998 consent decrees were entered into with almost the entire

HDE HW industry, to resolve claims of several cases of

noncompliance.

In view of the new standards to be implemented and concerns

with claims of noncompliance and the lack of equity in testing

between the light-duty and engine industries, EPA determined that

it needed to devote more oversight to the engine industries. We

believe that the new testing, particularly the in-use tests, will

be an effective tool for promoting compliance with EPA emission

standards. It is likely that in the future EPA will conduct more 

engine tests than outlined in the cost study. Fees will not be

changed to reflect the additional cost of these tests without a

new rulemaking.

What Commenters Said:

Section 3.2.2. EMA states that EPA estimated the costs for the

enhanced testing programs listed on worksheet #16 to be $380,000

for HDE HW and $380,000 for NR CI. EMA notes that this cost

element alone is equivalent to $2,723 per HDE HW engine family and

$630 per NR CI engine family. In addition, EMA states that the

extra staffing needed to plan and oversee the enhanced testing

program results in costs of $5,093 per certificate. 

Our Response:

As discussed in the response to Section 3.2.1. above, EPA

made several adjustments to the projected testing listed in the

proposal including changes to the Enhanced Engine Compliance

Programs described in revised worksheet #16. The revised Enhanced

Engine Compliance Program outlines a testing programs at a cost of

$165,000 for the HDE HW industry and $300,000 for the NR CI

industry. The cost per certificate for the enhanced engine

compliance program would be $1,115 and $453 per engine family for

the HDE HW and NR CI industries as proposed, respectively. EPA

believes that this cost is justified as the new enhanced

compliance program is needed as explained in the response to

section 3.2.1, above.

EMA also referenced and expressed concern over the estimated

extra staffing costs of $662,038. However, the Agency has only

added one FTE to CCD Washington, DC, at a cost of $99,580 before

overhead costs. This FTE will plan and oversee the enhance engine

program. Also testing will be conducted at contracted facilities.
60

What Commenters Said:

Section 3.2.3. With regard to worksheet # 7, EMA questioned

LOD’s added expenses of 2.25 direct FTE and 0.5 indirect FTE and

EMA sought clarification as to how and why the Agency allocated

these FTE to the HDE HW category as there is no description of

what these new FTE would be doing. EMA also questioned whether

the additional FTE might be inappropriately linked to the

contracted out testing in worksheet # 16 or whether these costs

are already incorporated into the CCD summary sheet at worksheet

#4.

Our Response:

EPA has revised LOD’s additional labor needs to 1.25 direct

and .25 indirect FTE. This revision reflects the labor needed to

conduct the revised number of in-use HD HW tests that will be

conducted in the Ann Arbor laboratory. The 1.25 direct FTE

include 1.0 FTE technician to conduct the testing in the test

cells and 0.25 FTE to provide engineering support. The indirect

FTE of 0.25 reflects the need for data management support for the

test cells. The FTE are not linked to nor duplicated in the costs

for the enhanced engine testing included in worksheet #16 as the

additional FTE will be participating in testing that will be

conducted at NVFEL. 

What Commenters Said:

Section 3.2.4. EMA expresses concerns regarding worksheet # 12

and the entry of $275,431 for “core testing costs” for HDE HW

which is carried over to worksheet #3 and then to worksheet #1. 

Of these costs $225,360 is shown for heavy-duty engine

procurement. EMA contended that one would presume that this cost

is associated with an in-use testing program even though the

nature of the testing is not described. The remaining costs

appear to be allocated to the HDE HW category using the FTE method

and this cost should similarly be excluded unless EPA provides an

explanation of what this core testing is, why it is needed and how

it complements and integrates with other compliance programs that

exist or are proposed elsewhere in the NPRM. The commenter

questions whether all of the testing programs in worksheet #12 and

worksheet # 16 are needed in addition to the Agency’s existing

compliance testing protocols.

Our Response:
61

Proposed engine procurement costs for heavy-duty engines were

shown in worksheet # 12. EPA had proposed to test 10 in-use

engines, two engine families of five engines per family. The cost

to procure the engines is $25,240 for the first engine of the

family and $21,860 for subsequent engines as explained in general

terms in the Cost Analysis, page 52. The revised test plan

consists of testing of three engines in one engine family. The

new cost for procuring these engines, at the same cost per engine

as proposed, is $68,960. The revised costs are shown on new

worksheet # 12. This testing will be conducted at the Ann Arbor

facility and will be conducted in addition to the HD HW in use

testing listed on worksheet #16 in which one in-use HD HW family

will be tested. Therefore, only two heavy-duty highway engine

families will be evaluated out of the estimated 148 that are

certified on a annual basis. Thus, less than two percent of the

certified family production would be evaluated for in-use

emissions annually by EPA. EPA believes that this in-use testing

is justified as explained in the response to section 3.2.1, above.

3.3 General Cost Study Comments

What We Proposed:

EPA’s cost study detailed the costs the Agency incurred in

implementing the MVECP. We set forth our explanations and

reasoning in detail in the Cost Analysis Document. For example,

we explained how we translated our costs into the proposed fees. 

What Commenters Said:

Section 3.3.1. EMA stated that without detailed knowledge of

EPA’s budget and budgeting process it is difficult to comment or

challenge the specific cost elements in EPA’s analysis. As stated

previously, EPA is projecting the costs of future programs that

have not been finalized or proposed. As such EPA has failed to

provide commenters with the “necessary information” to comment in

an adequately informed manner on the NPRM.

Our Response:

In our proposal, we explained the specific components of the

MVECP. (See 67 FR at 51406-08). As earlier mentioned in section 2

we also conducted a cost analysis to determine the costs

associated with our certification and compliance program and set

forth our analysis in the Cost Analysis Document. It describes

EPA’s current costs and projected costs for the identified program
62

components. As earlier mentioned in section 2, we projected our

costs to 2003 using the best information available at the time

that the cost analysis was written. Wherever possible,

explanations were included to detail the source of the

information. Thus, we believe that we have “identif[ied] the

components of the [MVECP] and provide[d] a brief explanation of

why each component is a part of the [MVECP] program.” American

Medical Association v. Reno, 57 F.3d 1129, 1135, (D.C. Cir.).

We also believe that the Agency’s budget is too general in

nature and as such does not contain the level of specificity and

explanations we have set forth in the Cost Analysis Document. 

This is because the Agency’s budget is prepared to reflect the

divisional levels and also generally entails resource allocation

issues.

What Commenters Said:

Section 3.3.2. EMA states that the fee assessments would recover

EPA’s total cost in procuring equipment such as “computer

hardware/software”, “in-use on-vehicle testing” and “on-vehicle

testing units purchase” as listed on worksheet #13. EMA states

that it presumes that this is for the initiation of portable

emission testing or “ROVER-type” in-use testing to enforce the

Agency’s NTE requirements and goes on to state that this is

inappropriate because the NTE requirements do not take effect for

heavy-duty highway engines until 2007 and have not been proposed

for NR CI engines. EMA further contended that the Agency was

seeking to recover these “one-time” procurement costs annually.

Our Response:

The costs that EMA specifically refers to are for equipment

required for EPA’s engine emissions in-use screening testing. EPA

currently uses portable emissions test equipment for screening inuse engines for compliance with the applicable emissions standards

and the defeat device prohibition, not for compliance with NTE

emission standards as suggested by EMA. EPA plans to use this

tool to refer engines that are suspected of noncompliance to be

tested on engine dyno either in the AA lab or at a contracted

facility. For this reason, the cost of the equipment is

appropriate.

Portable emissions test equipment is a very effective

screening tool. The equipment can collect a significant amount of

data from engines without having to take the engines out of
63

service. EPA plans to increase its number of testing units and

expand the screening program. The costs of the equipment included

in the cost study are recurring costs as EPA will need to buy

additional testing units, replace outdated and damaged equipment

and will have to maintain of the units that have been purchased. 

Section 4: Automatic Adjustment of Fees

What We Proposed:

We considered the effect of inflation on the MVECP and

explained that inflation may have an impact on our recovery of the

full costs associated with the program. Thus, we proposed,

beginning with the 2005 model year, an annual automatic adjustment

of fees based on the annual change in the Consumer Price Index

(CPI). We also proposed a formula to enable manufacturers to

calculate the increase. We also solicited comments on alternate

ways of adjusting fees on account of inflationary factors. (See

67 FR at 51410)

 We explained that we intended to issue annual letters,

again beginning with the 2005 model year, informing manufacturers

of the adjusted applicable fees. The proposed formula included an

ability to project future fees due to the CPI adjustment based on

two model years before the adjusted fee model year. Thus for

model year 2005 EPA proposed a formula whereby the CPI for MY2003

(as determined by July 2003 CPI number) is compared to the CPI

from 2002. We also solicited comments regarding notification

procedures of the new fee amounts. Id.

What Commenters Said:

Section 4.1.1. One commenter urged the Agency not to include an

annual automatic adjustment and maintained that an “automatic”

increase in fees based on the CPI for “all items” should not be

implemented as the actual costs of MVECP will be impacted by many

factors more significant than the CPI and such factors are not

significantly correlated with the general rate of inflation. This

commenter also suggested that the Agency’s formula for annual

adjustment is improper because many of the underlying costs are

actually one-time capital expenditures that will not fluctuate at

all in response to any changes in the CPI.

Our Response:
64

In order to comply with both section 217 and the IOAA, and to

timely collect fees based on actual costs and to collect fees for

such costs at time of certification, EPA believes that it is most

practical and appropriate to collect fees based on what it

reasonably believes will be its actual costs at the time new

certification applications are received. Thus EPA continues to

believe it most appropriate to determine its current costs and how

such costs may be affected by future events, including events such

as inflation or the addition of new compliance programs. Although

EPA does recognize that several variables exist which may

influence the actual future costs that EPA incurs to provide MVECP

services, including changes to its budget (and resulting changes

to EPA’s expenditures on certain compliance programs such as

contract costs for testing and procurement of testing vehicles,

etc), EPA believes that such general historical budget variability

(appropriations for most of EPA’s costs don’t change dramatically

from year to year and general contract costs remain relatively

unchanged) has not in fact significantly affected EPA’s actual

costs as compared to increases associated with annual inflation

costs. However, by today’s rule we are narrowing the budget items

that will be affected by the inflation adjustment to further limit

those items that may indeed be affected by general budget

variability. 

We believe it is reasonable to consider the effect of

inflation on the costs of conducting our various certification and

compliance programs. However, at this time, EPA chooses to only

implement a fee schedule that will include some adjustment by

calendar year for labor costs as these costs can be reasonably

determined as explained below. 

We also agree with comments that fees should not be adjusted

for one-time capital expenditures or for other fixed costs. 

Because several components of the MVECP reflects items that have a

“fixed cost” (for example, the costs associated with the Lab

Modernization), EPA has changed the inflation formula to address

concerns regarding “one time costs” and that such cost not be

adjusted by the CPI. At this time, EPA will only adjust labor

costs each calendar year because, as explained below, we can

reasonable determine the effect of inflation on these costs.

EPA also believes that to some extent it may not be

appropriate to automatically adjust fees for the costs of some

compliance programs, including current direct program costs (e.g.

contract costs) despite the general history of such costs

increasing by some amount each year. Because EPA is not only
 10 EPA normally uses Federal payroll and non-payroll inflators

for budget projections issued by the Office of Management and

Budget (OMB) when OMB submits the President’s Budget to Congress

and the assumptions used for the “inflators” are higher than the

CPI inflation adjuster that EPA is choosing to use to account for

increases in labor costs in today’s rulemaking. For example, in

the fiscal year 2004 (FY 04) President’s Budget to Congress, for

FY 04 EPA used a payroll (or labor) inflator of 1.048 and for FY

05 through FY 13 EPA used an inflator of 1.040. 

65

continuing to implement its many current compliance activities but

is also implementing several new compliance programs that may not

have a predictable cost increase each year that tracks the

inflation rate, EPA is not adjusting such direct program costs. 

EPA believes that the determination of the labor requirements

to cover the numerous compliance activities was accurate and that

such labor requirements will remain constant or perhaps slightly

increase within the next few years. Such labor costs (as

expressed in annual salary increases or decreases) for EPA

historically track a rate of increase (or decrease) that is at

least as high as that of the CPI10. Thus, we are finalizing our

regulations with a provision for automatic adjustment of labor

costs for each fee category based on the changes in the CPI. 

The table below represents the labor costs and the fixed

costs for each certificate type. The fixed costs, represented in

the F column, are those items in the cost study that are either

amortized or otherwise may be affected by variables beyond

inflation. These costs are determined from worksheet #1 and

include a total of all “operating costs” (both indirect and

direct) and thus does not include the labor costs and overall EPA

overhead costs on worksheet #1.

The labor costs, those that will be affected by the CPI, are

represented in the L column. These are the costs that will

increase or decrease with the CPI. These labor costs were

determined from worksheet #1 and the total labor (direct and

indirect) costs associated with each fee category.

The LD category has been split into Cert/FE (fuel economy)

and In-use subcategories because not all LD certificates direct

EPA In-use services. The costs were totaled from the labor and

fixed costs of worksheets #3 and #4 of the Cost Analysis. The

values of EPA’s labor and fixed costs for the ICI, motorcycle,
66

heavy-duty highway engines, nonroad CI engines and Other

categories were taken from worksheet #1 of the Cost Analysis and

are shown below:

F L

LD

Cert/FE

$3,322,03

9

$2,548,110

LD In-use $2,858,22

3

$2,184,331

LD ICI $344,824 $264,980

MC HW $225,726 $172,829

HD HW $1,106,22

4

$1,625,680

NR CI $486,401 $545,160

Other $177,425 $548,081

This Other fee category continues to include the costs

associated with MVECP services for the marine SI

inboard/sterndrive industry although the certification fees are

not being finalized for that marine SI inboard/sterndrive

certification type by today’s rule (see section 1.2 for further

discussion). At the time the final emissions rule for this

certification type is proposed and becomes final, EPA will

reexamine whether approximately 25 certificates per year will be

issued to this certification type. The other certification types

covered in the “Other” category will not be charged for any costs

(fixed or labor) associated with the marine SI inboard/sterndrive

certification type. The Other category includes: HD HW evap,

including ICI; Marine (excluding inboard and sterndrive) including

ICI and Annex VI; NR SI, including ICI; NR Recreational (nonmarine), including ICI, Locomotives, including ICI.

The total cost for each certificate type commencing in 2006,

and each year thereafter, will be determined by multiplying the

labor costs (as noted in the table above) for each fee category by

the CPI ratio of the calender year (CY) that the fees will be

effective (minus two years) to the CPI of calendar year 2002, then

adding the fixed costs. The total of the adjusted labor costs
67

plus the fixed costs are then multiplied by the existing overhead

rate of 16.9 percent. This is similar to our proposed method

except that we will now be adjusting only our labor costs. EPA’s

overall overhead costs are not adjusted. We are also implementing

this automatic adjustment in the 2006 calendar year instead of the

proposed 2005 in order to provide a stability period before the

fees are adjusted. As explained below in section 4.1.4, for

administrative simplicity, EPA will make annual adjustments by

“calendar year” rather than “model year.” 

For each fee category EPA will determine the fee for

applications submitted during any calendar year starting in 2006

and each year thereafter using the formula below:

Category Feecy= [F + (L * (CPICY-2/CPI2002))] * 1.169 / [(cert#MY2 + cert#MY-3) * .5]

The first year that the fees will increase is 2006. That

year EPA will determine the new fees using the following formula: 

 Category Fee2006= [F + (L * (CPICY2004/CPI2002))] * 1.169 /

[(cert#2004 + cert#2003) * .5]

F= Fixed costs within a category, the sum of LOD and CCD Total

Indirect Program Costs and Total Direct Costs rows for each

category, worksheets #3 and #4

L= Labor costs within a category, from Total Labor Costs rows,

worksheets #3 and #4

Feecy = the calendar year of the fees to be collected

CPICY-2 = the consumer price index for all U.S. cities using the

“U.S. city average” area , “all items” and “not seasonally

adjusted” numbers calculated by the Department of Labor listed for

the month of November of the year two years before the calendar

year. (e.g., for the 2006 CY use the CPI based on the date of

November, 2004).

CPI2002 = the consumer price index for all U.S. cities using the

“U.S. city average” area , “all items” and “not seasonally

adjusted” numbers calculated by the Department of Labor for

December, 2002. The actual value for CPI2002 is 180.9.

1.169 = EPA’s 16.90 percent overall overhead cost

cert#MY-3 = the total number of certificates issued for a fee

category three years prior to the model year for applicable fees

(Feecy)

cert#MY-2 = the total number of certificates issued for a fee

category two years prior to the model year for the applicable fees

(Feecy)
68

For example and by way of a hypothetical, to determine the

applicable fee for LD ICIs for any certification application

received in calendar year 2006, based on a fixed cost of $345,355

and a labor cost of $264,980, a CPI in 2002 (December 2002) of

“180.9" and a CPI in November, 2004 of “183.1" (this number

represents the CPI in February 2003 and EPA will use the actual

CPI number for November 2004 once it as been determined by the

Dept. of Labor, since determined to be 183.9) , 95 certificates

issued in 2003 and 85 certificates issued in 2002, the formula

would be:

Fees2006(LD ICI) = [$345,355 ( $264,980 (183.1/180.9))] * 1.169/

[(95 85) * .5]

This equals $7,969 (all rounding of numbers should occur at the

end of the calculation and the final dollar amount of the new fee

will also be rounded up or down to the nearest dollar) and

represents a cost decrease per ICI certificate of $425 from the

fee being finalized today which will only apply from the effective

date of the rule through the 2005 calendar year.

Currently one can determine the CPI numbers by going to the

Bureau of Labor Statistics website: 

(http://www.bls.gov/data/home.htm), then choosing the icon under

“CPI-All Urban Consumers (Current Series) under the “Most

Requested Statistics” column. From that page, choose (by

checking the box) U.S. All items, 1982-84=100 - CUUR0000SA0. 

This results in a page with a table called “Series Id: 

CUUR0000SA0" from which the applicable numbers may be drawn.

EPA also notes that manufacturers may have some concern

regarding the proper budgeting for its costs for future

certification applications and thus the regulations note that EPA

will provide notification to manufacturers at least 11 months in

advance of the calendar year in which new fees are due. If an

event such as a rulemaking occurs that causes a significant change

in the number of certificate applications received, the Agency

will reexamine the formula to determine whether adjusting the fees

based upon the number of certificate applications is still

applicable.

What Commenters Said:

Section 4.1.2. Some commenters argued that automatic fee

increases would reduce EPA’s incentive to provide more efficient
69

MVECP services and thus would amount to “gold plating” which

Congress admonished against. 

Our Response:

EPA does not believe that automatic fee increases would

amount to “gold-plating,” rather EPA is recognizing that annual

adjustments to its labor costs are a reality and that in order to

recover its actual costs in a timely manner that an automatic

adjustment best serves this function. We believe that the intent

of both the IOAA and section 217 is for EPA to continue to collect

its full actual costs and to do so in a reasonable and timely

manner; EPA does not believe it timely to periodically evaluate

its labor costs (in light of inflation) and issue subsequent new

fees rules. The result of such practice would be for EPA to forego

collecting a significant portion of its costs. EPA continues to

strive to provide its services in an efficient manner and

recognizes that other cost adjustments may be necessary in the

future and will at that time conduct an additional cost study and

rulemaking if significant changes in its costs have occurred. 

What Commenters Said:

Section 4.1.3 Two commenters suggested that any adjustments to

fees should be done through periodic rulemaking and be based on

actual rather than assumed costs. Otherwise there is no incentive

for the Agency to review its actual program to determine the

latest actual costs of the program. One of the commenters noted

that even the number of certificates that are issued by EPA could

have a more significant effect than changes due to inflationary

increase.

Our Response:

EPA agrees with the comment that the number of certificates

that are issued could have a significant effect on the amount of

fees that should be charged per certificate and addresses that

issue in section 3.1.

As noted in the discussion in section 3.1, EPA is adopting a

provision to adjust fees based on any potential change in the

number of certificates starting in the 2006 calendar year and will

employ a similar methodology as the annual inflation adjustment

and will perform both at the same time. The fee amount per

certificate will be determined by dividing the total cost for each

certificate type (as determined under the inflation calculation
70

noted above) by the “rolling average” of the number of

certificates issued by EPA for the model years three and four

years preceding the calendar year that the fees will become

effective.

EPA is committed to the objectives of recovering its actual

costs in a timely manner and in providing fee payers proper notice

of the amount of fees that are required when they apply for

certification. EPA anticipates that it will have an opportunity

to make any necessary adjustments to the fees regulation during

the course of several future rulemakings. However, EPA disagrees

with the commenters suggestions that any adjustments should be

done through a periodic rulemaking. The clear formula that EPA

has provided by today’s rulemaking provides a predetermined basis

by which to determine adjustments to fees based on any change in

the number of certificates or changes in the costs of labor to

provide the same services as are provided currently. The changes

in the costs of labor (for the same number of employees) is based

on a very conservative formula of the annual CPI. EPA believes

this is a fair and reasonable process for adjusting fees and

avoids unnecessary and possibly untimely rulemaking (a rulemaking

not done in time to reflect changes in the number of certificates

or labor costs) that may prove inefficient.

In addition, EPA will issue a notice at least 11 months

before the calendar year in which new fees are owed which will

notify certification applicants of the new fees. As discussed in

section 3.1 regarding the number of engine families or

certificates issued within a certification request type, EPA plans

to make this inflation adjustment calculation at the same time as

the calculation of the number of certificates and will announce

both adjustments together. In other words, EPA will analyze the

adjusted costs based on inflation and also determine the new

average number of certificates.

What Commenters Said:

Section 4.1.4. A commenter also expressed concern with EPA’s

proposal to issue notices of fee adjustments through a guidance

letter on grounds that the letter will not provide adequate

notification to manufacturers and will provide no adequate

opportunity for public review and comment. The commenter further

asserted that manufacturers would need at least 15 months notice

prior to the model year commencement. EPA notes that this same

commenter suggests that a manufacturer would need to receive

notice by October 1, 2003 which would be 15 months in advance of
71

January 1, 2005. This would be impractical since a manufacturer

could receive a certificate for model year 2005 on January 2, 2004

and it could receive such certificate if it submitted its

application by November, 2003.

Our Response:

EPA wishes to clarify that the fees adjustment formula as

proposed and finalized today, is a self-implementing mechanism (in

fact, the fee payer is able to perform the CPI/labor calculation

based on the formula set forth in today’s regulation and the

effect of the number of certificates is also predetermined). As

such, EPA plans to issue a letter providing information to the

manufacturers of the upcoming rates approximately 11 months before

they become effective by operation of today’s rule. EPA believes

this will provide reasonable opportunity for manufacturers to make

necessary preparations for paying any adjusted fees at time of

application for certification..

Because EPA proposed the basis (and formula) by which fees

will be adjusted for inflation and it involves a relatively

ministerial collection of facts and application to the formula we

continue to believe that the appropriate mechanism by which to

adjust such fees is by this mechanism rather than a new rulemaking

which would only perform a similar task. By today’s rule fee

payers will be informed of the fees applicable until 2006 and will

know how fees will be adjusted on an annual basis (for variable

costs as explained above) by operation of today’s rule. 

However, because both EPA and manufacturers may be involved

in the submitting, processing, issuing and receiving certificates

for different model years at the same time, and because EPA is

attempting to recover the costs for actual services provided at a

given point in time we believe it is reasonable to adjust fees by

calendar year rather than by model year. This will avoid the

confusion regarding the amount of fees that are owed and whether

the certification applications were submitted before or after

EPA’s adjustment. Because of the overall timing of this rule we

also believe it is appropriate to implement the fee adjustment

starting in the 2006 calendar year. Therefore, starting in

calendar year 2006, for any certification application that is

received on January 1, 2006 and thereafter (until fees are

adjusted for calendar year 2007 and certification applications are

submitted on January 1, 2007 and thereafter, etc.) EPA will issue
72

a letter approximately 11months before the applicable calendar

year informing manufacturers of the adjustment in fees. 

Section 5: Effective Date and Application of New Fees

What We Proposed:

We proposed the “effective date” of our new fees schedule as

60 days from the date of publication of the final rule. (67 FR at

51411). We also proposed applying the new fees to 2003 and later

model year vehicles and engines. Id. In addition, we proposed

excluding “complete” certification applications received prior to

the effective date of the new fees regulation (including any

remaining 2003 certification applications). Id.

What Commenters Said:

Section 5.1.1. One commenter suggested that the new fee schedule

should take effect for certification applications for the model

year following the model year in which the final rule is

published, in this way the manufacturers will have certainty

regarding the appropriate amount of the certification fee to be

submitted and thus will not have to guess the date that EPA will

deem their certification application complete.

The Alliance/AIAM stated that EPA’s proposal to increase fees

(for light-duty vehicle manufacturers) for manufacturers that

submit 2003 and later model year certification requests received

on or after 60 days from publication of the final rule creates

uncertainty regarding the appropriate fee to submit with each

application. The commenter notes that it cannot project when EPA

will issue the rule and thus for it to perform its necessary

budgeting to assure that it has necessary funds to cover the

increase. 

Our Response:

EPA understands that it would be helpful to

manufacturers to have a date before which they are assured that

they will be paying the old fees so that they can budget with

certainty up to that date. For this reason EPA is finalizing the

implementation date as of 60 days from the publication of the

final rule. We believe that at least a 60 day lead time between

when the rule is published and when applicants will be required to

pay new fees is adequate and appropriate. EPA is again guided by

the principle that its compliance programs ought to be self-
73

sustaining to the extent possible and that because we are

incurring costs at this point in time that new fees should

commence. Although we anticipated that the final fees rule would

become final in fiscal year 2003 (FY03), and based our projections

of costs to be incurred during that time, we believe it even more

appropriate that we collect fees in FY04 (during which this rule

becomes effective) as our compliance programs based on new

requirements such as Tier 2 and the 2004 HDE regulations will be

in place and our anticipated budget increases will be more likely

in place.

 In addition, manufacturers have been informed of the new

fees rulemaking and commencement of new fees in FY03 for over 2

years. An advance fees rulemaking briefing was held for

regulated industries on August 29, 2001 in Ann Arbor, MI. At

that time EPA provided a draft of the fees schedule and cost

study. The purpose of the briefing was to give businesses enough

time to plan for fees in their budgets. Furthermore, the

proposed rule was published in August 2002 giving manufacturers

notice of the fees rulemaking and implementation time periods. 

Therefore, the new fees will be applicable to any new

certification applications (for MY2004, or 2005) submitted and

received on or after the date 60 days after publication of this

rule in the Federal Register. The new fees will not apply to any

certification applications received by EPA prior to the effective

date of the regulations, providing that they are complete and

include all required data. 

What Commenters Said:

Section 5.1.2. One commenter expressed concern that manufacturers

will have no way of knowing whether their applications have been

received and deemed complete before the rule becomes final, and

that potential delays in EPA’s review of the applications could

result in an undue increase in fee or delays in determining the

appropriate fee. Instead, EPA should impose new fees for the

model year following the model year in which the final rule is

published, with at least 16 months prior to the January 1 of the

same model year.

Our Response:

Once a complete application is submitted to EPA the length of

time it takes to review the application will not be a factor in

meeting the effective date deadline. Follow up questions or

clarification questions pertaining to complete applications will
 11For ICIs, the requirement of ORVR and OBD systems depend on

the age of vehicle and model year. ICIs should check with their 

EPA certification representative for the vehicle or engine model

year certification requirements.

74

not be a factor in meeting the effective date deadline. As long

as a complete application is submitted before the effective date 

the manufacturer may pay the current fee, or in the case of

nonroad manufacturers no fee payment would be required at that

time.

EPA maintains that manufacturers must submit a complete

certification application in order to be considered meeting the

effective date deadline. A complete application may slightly vary

among the various industry types but in general a complete

certification application includes basic information about the

engine family/test group, emissions test data, certification

levels, applicable emission standards, and information on emission

control components.

For light-duty vehicles a complete application includes a

summary sheet of emissions test data and basic information on

test group, certification levels, applicable emission standards,

carryover information, auxiliary emission control device (AECD)

information, description of emission control components used,

descriptions and EPA approvals for On-Board Vapor Refueling (ORVR)

and On-Board Diagnostics (OBD) systems.

For ICIs, the complete application for certification should

contain a summary of the emissions test data, city and highway

fuel economy (mpg) data, evaporative test data, test vehicle

description, a description of vehicles covered by a certificate,

50K, 100K, and 120K Deterioration Factors (DFs), applicable

emissions standards, statements of compliance for Cold CO and the

Supplemental Federal Test Procedure (SFTP) and EPA approvals for

ORVR and OBD systems11.

A complete heavy-duty vehicle and engine application

includes basic information on the engine family, emission limits

for Average, Banking & Trading (AB&T) families, emissions test

data, certification levels, applicable emission standards,

information on where the testing was performed, carryover

information (if applicable), AECD description, a detailed

description of all emission control components, parts listing,

parts numbers, emission control components description, copy of
75

maintenance instructions to be provided to the purchaser, copy of

the emissions label, and a signed statement of compliance. 

A complete nonroad application includes basic information on

the engine family, emission limits for AB & T families, emissions

test data (including evaporative data where required) ,

certification levels, deterioration factors, applicable emission

standards, information on where the testing was performed,

carryover information (if applicable), AECD description, a

detailed description of all emission control components, parts

listing, parts numbers, listing of model applicability, emission

control components description and description of operation, and 

a signed statement of compliance, description of the test

procedure used, special or alternative test procedure description

if applicable, operating cycle and the service accumulation period

necessary to break-in the test engines and stabilize emission

levels, scheduled maintenance, description of adjustable operating

parameters, copy of maintenance instructions to be provided to the

purchaser and a copy of the emissions label, and a durability

demonstration for any after-treatment device used in an engine

family.

In summary, complete applications as described above must be

submitted before the effective date in order to fall under the

pre-existing fee amounts. In addition, the time required for EPA

to review the application will not be a factor in meeting the

effective date. As long a complete application is submitted

before the effective date takes place, the current fee regulations

would still apply to that application. Incomplete applications

or applications with major pieces of information missing will not

be considered complete. If an incomplete application is submitted

a week before the rule’s effective date, manufacturers should be

prepared to pay the new fees for that application.

What Commenters Said:

Section 5.1.3. One commenter stated that the title to 40 CFR

85.2405(a) - Fees for the 2003 and 2004 model years - may be

misleading since the fees proposed apply only to certain 2003

engine families (those submitted after the effective date of the

new fees rule). 

We have revised the title to 40 CFR 85.2405(a) to read “Fees

for the 2004 and 2005 calendar years.” Because of the different

certification time periods during the calendar year in which

various industry types choose to certify we continue to believe it
76

most appropriate to make the new fees applicable at a point in

time where new costs are incurred and regardless of what model

year any manufacturer may be certifying. We have changed the title

to also include the 2005 calendar year as EPA will be collecting

the same amount of fees from the effective date through the 2005

calendar year (we will not be adjusting fees until the 2006

calendar year and have thus changed the title to 40 CFR 85.2405(b)

to read “Fees for the 2006 calendar year and beyond.” 

As explained in section 5.1.2, any complete certification

applications (submitted for model year 2004, or 2005) which is

submitted and received on or after the date 60 days after

publication of this rule in the Federal is only subject to EPA’s

existing fees rule, therefore we do not believe it necessary to

provide further clarification to 85.2405(a). For example, a model

year 2004 nonroad certification application received before the

new fee rule becomes effective would not require any fee to be

paid since under EPA’s existing fee rule (from 1992) no fees are

required for nonroad applications.

Section 6: Reduced Fees

6.1 Reduced Fee of One Percent Aggregate Retail Price

What We Proposed:

EPA proposed to continue the current two part test which, if

met, would qualify an applicant for a reduction of a portion of

the certification fee.

A reduced fee is available when:

(1) The certificate is to be used for the sale of vehicles

or engines within the U.S.; and

(2) The full fee for the certification request exceeds one

percent of the projected aggregate retail price of all

vehicles or engines covered by that certificate. 

Manufacturers that qualify for a reduced fee pay one percent

of the aggregate retail price of the vehicles and engines covered

by a certificate. Under the reduced fee provision, we proposed to

retain this requirement to ensure proper balance between

recovering the MVECP costs and mitigate economic burden. EPA

invited comment on the continued use of the one percent

multiplier, 67 FR 51412.
77

The Agency proposed two separate pathways by which a

manufacturer may request and pay a reduced fee amount. Under the

first pathway, manufacturers seeking a reduced fee would include

in their certification application a calculation of the reduced

fee and a statement that they meet the reduced fee criteria. The

manufacturer’s evaluation and submission of a fee amount under

this reduced fee provision would be subject to EPA review or

audit. Id. The Agency proposed that the applicant for a reduced

fee also subsequently provide EPA with a report (called a “report

card”). This report would include the total number of vehicles

ultimately covered by the certificate, including information on

all certificates held by the manufacturer that were issued with a

reduced fee, a calculation of the actual final reduced fee due for

each certificate, which is derived by adding up the total number

of vehicles and their sales prices, a statement of the total

initial fees paid by the manufacturer, and the total final fees

due for the manufacturer. Id. We also proposed that

manufacturers would also be required to “true -up” or submit the

final reduced fee due as calculated in the report card within 45

days of the end of the model year. Id.

Under the second pathway, manufacturers who, due to the

nature of their business, are unable to make accurate estimates of

the aggregate projected retail price of all the vehicles or

engines to be covered by the requested certificate, would pay one

percent of the retail selling price of five vehicles, engines or

conversions when applying for a certificate or a minimum fee of

$300. Examples of such manufacturers are those that modify

customer-owned vehicles (as done by some ICIs and after-market

alternative fuel converters) since they are uncertain of their

customer base. Under this pathway, manufacturers would be

required to submit the same report card and true-up the actual

amount of reduced fee due similar to the first pathway, described

above. Id.

What Commenters Said:

Section 6.1.1. VSC contended that the proposed minimum “5-car-upfront deposit” was unreasonable and that the Agency had failed to

provide a rationale for its proposal. VSC also stated that it is

just as common, if not more common, for an ICI’s certificate to

cover a total of one (1) car as opposed to 5. VSC noted that EPA

had previously acknowledged that it is difficult for ICIs to work

with a system that requires them to predict the number of cars

they will import. VSC stated that the same associated problem

would arise under the Agency’s proposal.
78

VSC suggested that the one percent low volume fee should

allow the ICI to pay one percent of the value of the cars to be

covered by the certificate for which the ICI has a contract when

making a certification request. VSC further suggested that for

additional cars imported under the certificate, ICIS should pay

one percent of the value of each car as each car is imported,

until payment of the standard $8,394 fee. VSC noted that under a

pay-as-you-go system, EPA would receive fees at the time of

certification or importation and ICIs would only pay for cars they

are actually working on and importing.

Our Response:

In response to comments received EPA has modified its reduced

fee provisions to respond to many of the issues raised. The

revised reduced fees provisions are as follows:

The reduced fee program for this rule provides two separate

pathways by which a manufacturer can request and pay a reduced fee

amount. The fee will be one percent of the aggregate retail price

of the vehicles and engines covered by the certificate with a

refundable minimum initial payment of $750. Each pathway

specifies when manufacturers are required to determine the price

of the vehicles or engines actually sold under a certificate and

when to either pay additional fees or seek a refund. Under both

pathways the manufacturer: 

1) Pays a fully refundable initial payment of $750 or one

percent of the aggregate retail price of the vehicles or engines,

whichever is greater, with the request for a reduced fee.

2) Receives a certificate for an estimated number of vehicles

or engines in the engine family to be covered by the certificate.

3) Requests a revised a revised certificate if the number of

vehicles or engines in the engine family exceeds that on the

certificate.

4) Is in violation of the Clean Air Act if the number of

vehicles or engines made or imported is greater than the number

indicated on the certificate.

The first pathway will be available for engine families

having less than six vehicles, none of which have a retail price

of more than $75,000 each. Manufacturers seeking a reduced fee

include in their certification application a statement that the

reduced fee is appropriate under the criteria. If one percent of

the aggregate retail price of the vehicles or engines is greater
79

than $750, the manufacturer must submit a calculation of the

reduced fee and the fee. If one percent aggregate retail price of

the vehicles or engines is less than $750 the manufacturer will

submit a calculation of the reduced fee and an initial payment of

$750. In the event that the manufacturer does not know the value

of all of the vehicles to be imported under the certificate, it

may use the values of the vehicles or engines that are available

to determine the initial payment. 

 The manufacturer’s evaluation and submission of a fee amount

under this reduced fee provision is subject to EPA review or

audit. If the manufacturer’s statement of eligibility is

accepted, the manufacturer will receive a certificate for five

vehicles or engines. 

If the manufacturer’s statement of eligibility or request of

a reduced fee is rejected by EPA then EPA may require the

manufacturer to pay the full fee normally applicable to it or EPA

may adjust the amount of the reduced fee that is due. 

A manufacturer’s statement that it is eligible for a reduced

fee can be rejected by EPA before or after a certificate is issued

if the Agency finds that manufacturer’s evaluation does not meet

the eligibility requirements for a reduced fee, the manufacturer

failed to meet the requirements to calculate a final reduced fee

using actual sales data, or the manufacturer failed to pay the net

balance due between the initial and final reduced fee calculation

(see below for discussion of the final fee calculation, reporting

and payment). 

Within 30 days of the end of the model year, the applicant

for a reduced fee will also provide EPA with a report called a

“report card” to aid our review of the applicant’s statement of

applicability. This report shall include the total number of

vehicles ultimately covered by the certificate. The report card

shall include information on all certificates held by the

manufacturer that were issued with a reduced fee under the first

pathway. For each certificate the report will include a

calculation of the actual final reduced fee due for each

certificate which is derived by adding up the total number of

vehicles and their sales prices and calculating one percent of the

total, a statement of the initial fees paid and the difference

between the initial payment and the total final fee for the

manufacturer. Manufacturers will be required to submit the report
 12 Typically, this will be the first February 15 after a

certificate expires. Certificates generally expire on December 31

of the model year.

80

card within 30 days of the end of the model year12, EPA believes

this is reasonable as manufacturers should have final figures for

each certificate by this time.

A manufacturer may request a refund if the final fee is less

than the initial payment. If the final fee is greater than the

initial payment, manufacturers will be required to “true-up” or

submit the final reduced fee due as calculated in the report card

within 45 days of the end of the model year. The decision to

eliminate a minimum final reduced fee of $300 was made as a result

of comments regarding EPA’s proposed policy of only issuing

refunds greater than $500. This is discussed more fully in

section 8 of the Response to Comments Document. 

In addition, EPA may require that manufacturers submit a

report card, with the same or similar information as noted above,

for previous model years. The purpose of such report card would

be to give EPA assurance that the manufacturer has demonstrated a

continuous capability of submitting the necessary year-to-year

report cards and that appropriate fees have been paid. This will

assist EPA in its determination as to whether a manufacturer is

capable of adequately projecting its annual sales for reduced fee

purposes and whether the manufacturer shall remain eligible for

the reduced fee provisions.

Under this pathway, if a manufacturer fails to report within

30 days or pay the balance due by 45 days of the end of the model

year, then EPA may refuse to approve future reduced fee requests

from that manufacturer. In addition, if a manufacturer fails to

report within 30 days and pay the balance due by 45 days of the

end of the model year as noted above then the Agency may deem the

applicable certificate void ab initio.

The second pathway is available for engine families that

contain more than five vehicles or engines and/or have at least

one vehicle or engine with a retail price of more than $75,000. 

Manufacturers seeking a reduced fee under this pathway include in

their applications a statement that the reduced fee is appropriate

under the criteria and a calculation of the amount of the reduced

fee (1.0 percent of the aggregate retail price of vehicles or

engines) or an initial payment of $750, whichever is greater. As
81

in the first pathway, the manufacturer’s evaluation and submission

of a fee amount under this reduced fee provision is subject to EPA

review or audit. If the manufacturer’s statement of eligibility

is accepted, the manufacturer will receive a certificate for the

number of vehicles or engines to be covered by the certificate. 

 If the manufacturer’s statement of eligibility or request

of a reduced fee is rejected by EPA then EPA may require the

manufacturer to pay the full fee normally applicable to it or EPA

may adjust the amount of the reduced fee that is due. 

A manufacturer’s statement that it is eligible for a reduced

fee can be rejected by EPA before or after a certificate is issued

if the Agency finds that the manufacturer’s evaluation does not

meet the eligibility requirements for a reduced fee. 

At the end of the model year, the manufacturer may request a

refund if the final fee is less than the initial payment. 

Manufacturers with certificates issued with reduced fees under

this pathway will not be required to submit the report card and

true-up described above under the first pathway.

Under either pathway, if the manufacturer realizes that it

will make or import more vehicles or engines than the number

specified on the certificate, the manufacturer must request a

revised certificate with an increased number of vehicles or

engines indicated. At the time of revision, the manufacturer must

pay one percent of the aggregate retail price of the number of

vehicles or engines that are being added to the certificate. The

additional fee must be received by the Agency and the certificate

must be revised and issued before the additional vehicles or

engines may be sold or imported in the United States. If a

manufacturer imports or sells more vehicles or engines than that

indicated on the certificate, the manufacturer will be in

violation of the CAA for selling or importing uncertified vehicles

(those over and above the number indicated on the original

certificate.)

As suggested by VSC, after the initial payment has been

submitted, the above reduced fee provisions will allow

manufacturers to pay one percent of the retail price of each

vehicle or engine as needed. This pay-as-you go provision will

give ICIs and other manufacturers the advantage of only paying a

$750 (equivalent to the average fee for two imported vehicles) or

one percent of the value of the vehicles initial payment and then

paying for additional vehicles as needed. Manufacturers that
82

request revised certificates for an increased number of vehicles

will pay the additional one percent fee per vehicle at the time

the revised certificate is requested.

In some cases, when a manufacturer requests a certificate

under the first pathway, the retail price of five vehicles or

engines covered by the certificate may exceed the initial payment. 

Under the provisions we are finalizing today, the difference

between the initial payment and the final reduced fee will not be

required until after the end of the year. Therefore, EPA believes

that the reduced fee provides flexibility and mitigates any

unreasonable economic burden that a full fee may present to

manufacturers with small engine families.

What Commenters Said:

Section 6.1.2. Sierra Research (SR) supported our reduced fee

provision. In addition, they requested clarification of the term

“retail sales price” in the final rule. SR sought clarification

as to whether the “retail sales price” refers to the engine price

sold by the engine manufacturer to the equipment manufacturer

(OEM) or the engine price sold to the “consumer.” SR noted that

the latter is often referred to as the “replacement price,” and

would be a component of the total equipment price.

SR suggested that the term “retail sales price” refer to the

price at which the engine is sold to the OEM, and not the

replacement price. SR suggested that this term not refer to the

replacement price because it can be difficult to determine what

the replacement price is at the time of certification and it can

change over time. 

Our Response:

The retail sales price of a vehicle or engine is the price to

the consumer, or the replacement price, as defined by SR. This

price is the easiest to determine across industries as all of the

vehicles and engines are either made for sale or will have a value

on the market if a manufacturer was to replace its own product by

one of another manufacturer. If the final sales price is

different than the price projected at certification, the reduced

fee can be adjusted at the end of the model year to reflect the

correct retail sales price and additional fees may be paid or a

refund request may be made by the manufacturer.

What Commenters Said:
83

Section 6.1.3. SR noted that the regulations do not address how

to aggregate different retail sales prices and requested

clarification in the final rule.

SR suggested using the average sales price of all models

while noting that EPA would prefer a sales-weighted price where

the manufacturer multiplies the price of each model by the number

of engines projected to be sold, sums the results for all models

and then divides by the total number of engines for all models. 

Our Response:

The aggregate retail price of an engine family is the total

of the retail sales prices of each of the engines or vehicles in

the family added together. For example, if a manufacturer wanted

to certify a family of engines that included five engines that

sold for $100 each and four engines that would sell for $150 each,

the aggregate retail price of the family would be (5 x $100)+(4 x

$150) or $1,100.

What Commenters Said:

Section 6.1.4. EMA commented on proposed 40 CFR 85.2406(b)(5)(i)

which states that EPA may require future reduced fee eligibility

determinations if it determines that a manufacturer has not

properly assessed its eligibility for reduced fees in its initial

application. EMA commented that this was unnecessary because EPA

always has the final authority for making reduced fee

determinations. 

EMA also suggested that the language proposed in 40 CFR §

85.206(b)(5)(ii) which allows EPA to require a manufacturer to use

the provisions in (b)(7) rather than the provisions in paragraphs

(b)(1) through (b)(4) will generally not provide any disincentive

for improperly requesting reduced fees.

 This commenter further stated that proposed 40 CFR §

85.2406(b)(7)(i) was inconsistent with proposed 40 CFR §

85.2406(b)(5)(ii). Proposed 40 CFR § 85.2406(b)(7)(i) states

that a manufacturer must use the “second pathway” for reduced fees

“if EPA makes such a determination under paragraph (b)(5)(ii) of

this section” but subparagraph (i) of 85.2406(b)(7) states that

the request to use reduced fees under the provisions of pathway 2

shall be made prior to the submission of an application for

certification. The commenter observed that this inconsistency

arises when a manufacturer uses pathway 2 as a result of EPA
84

determination under (b)(5)(ii). To the commenter this appears to

not comply with the provisions of 85.2406(b)(7)(i).

Our Response:

EPA agrees with these comments and the final rule has been

amended to reflect the changes. The paragraph stating that EPA

may “require that future reduced fee eligibility determinations be

made by the Agency” is unnecessary and, therefore, the language is

not included in the reduced fee regulatory language set forth in

the final rule.

The final regulatory language does not state that EPA will

require a manufacturer to use one reduced fee pathway over the

other. The price and the number of vehicles or engines to be

covered by a certificate will determine the pathway manufacturers

will use to determine the initial reduced fee payment.

What Commenters Said:

Section 6.1.5. EMA sought clarification as to the applicability

of 85.2406(b)(5)(iii) which indicates that EPA may “deny future

reduced fee requests and require submissions of the full fee

payment until such time as the manufacturer demonstrates to the

satisfaction of the Administrator that its reduced fee submissions

are based on accurate data and that the final fee payments are

made within 45 days of the end of the model year.” EMA wondered

how manufacturers would make the requisite demonstrations if the

Agency denied all future requests for the use of reduced fees.

Our Response:

If EPA denies reduced fee requests and requires submissions

of full fee payment, the manufacturer should contact the EPA and

demonstrate that its reduced fee submissions are based on accurate

data and that the final fee payments are made within 45 days of

the end of the model year of the year in question. This can be

done by providing an explanation and any convincing information or

data that the reduced fee submission is appropriate and that

reports were submitted on time. Such data may include the most

recent production data for the previous year, proof of payment of

correct fees amounts for the previous year, and recent production

plans for the current year. Upon examining the data submitted by

the manufacturer for the model year in question, EPA may approve

the reduced fee request and, at that time, would consider any

future reduced fee requests.
13 Under the one percent of total sales trigger, engine sales

would have to be less than $82,700 to take effect; assuming a per

unit engine cost of $100, the manufacturer could sell no more than

827 engines ($82,700/$100 = 827 engines).

85

What Commenters Said:

Section 6.1.6. OPEI commented that the proposed reduced fee

system is inadequate for existing small volume engine families. 

OPEI’s example of this was the following: 

“Assume that a lawn and garden engine costs $100. For a

manufacturer to be eligible for a reduced fee (i.e., a fee less

than $827), the manufacturer could sell no more than 827 engines -

- one sixth of the existing small volume cutpoint.13 Thus the one

percent sales trigger is not an effective solution for small

volume lawn and garden engines.” 

OPEI quotes 40 CFR §90.3.: “In the lawn and garden context,

a small volume engine family means”:

[A]ny handheld engine family or any non-handheld engine

family whose eligible production in a given model year are

projected at the time of certification to be no more than

5,000 engines.

OPEI requested that EPA include an additional provision that

eliminates certification fees for small volume small sparkignition (SSI) engine families with less than 5,000 units. OPEI

further stated that eliminating the fee for small engine families

is critical because there is inadequate revenue from small volume

engine family sales to adequately spread the costs of the proposed

certification fees. OPEI commented that if EPA imposes a

certification fee on lawn and garden engines, the agency should

reconcile that fee with the 5,000 unit cutpoint definition of

small volume engine families in 40 CFR part 90. 

Our Response:

EPA established a reduced fee provision for instances to

alleviate the economic burden that may be imposed by the full fee

requirement. The reduced fee payment of one percent of the

aggregate retail price of the engines or vehicles will assure that

all manufacturers will be treated equitably and that none will be

required to pay more than one percent of the projected aggregate

retail price of small volume families of the engines or vehicles.
86

Emissions regulations have specified small volume engine

family sizes for different industries. The small engine family

sizes were specified to differentiate from larger engine families

for purposes such as technology application or regulatory

implementation. The fees rule differs from these rules as it does

not distinguish the need for a reduced fee by the size of the

family but, rather, by the amount of fees that the manufacturer of

the family would have to pay.

6.2 Retroactive Payment Under Reduced Fee Program

What Commenters Said:

EMA submitted an additional alternative to the reduced fee

pathways. EMA suggested that manufacturers who pay the full fee

at the time of certification should also have the ability to seek

refunds at the end of the model year if the fee paid exceeds one

percent of the retail sales. According to EMA, this would enable

EPA to receive the fees up front and avoid any unnecessary delays

while not adding too much year end burden for manufacturers

already required to produce year-end production volume reports.

EPA Response:

Currently, the retroactive reduced fee option is available

for those engine families/test groups that meet the one percent

reduced fee provision. Our response is just to clarify the

process. A manufacturer that pays the standard fee for an engine

family or test group and later determines that it meets the

criteria for a reduced fee may qualify for a retroactive reduced

fee. Under today’s provision, the manufacturer may be required

to submit a report card and a refund request at the end of the

calender year for the amount of the difference between the fee

paid and one percent of the aggregate retail sales price of the

vehicles or engines covered by the certificate.

6.3 Year End Report

What We Proposed:

We proposed that each applicant for a reduced fee must

provide EPA with a report card within 30 days of the end of the
 14Typically, this will be the first February 15 after a

certificate expires. Certificates generally expire on December 31

of the model year.

87

model year 14(67 FR 51411- 51412) . We stated that this report

shall include the total number of vehicles ultimately covered by

the certificate. The report card shall include information on all

certificates held by the manufacturer that were issued with a

reduced fee, a calculation of the actual final reduced fee due for

each certificate which is derived by adding up the total number of

vehicles and their sales prices, a statement of the total initial

fees paid by the manufacturer and the total final fees due for the

manufacturer. Manufacturers would be required to “true -up” or

submit the final reduced fee due as calculated within the report

card within 45 days of the end of the model year. Id.

What Commenters Said:

VSC stated there is no need for a year-end settlement, but a

year-end audit would be appropriate under the pay-as-you-go system

because EPA is getting its money at the time of certification or

importation. The commenter also stated that because ICI must file

EPA form 3520-8, a Final Admission Form, for each imported

vehicle, the payment of the additional fees can be easily tracked.

Our Response:

EPA believes that a year-end settlement is needed for some

manufacturers undergoing the reduced fee process. A true-up

requirement at the end of the year ensures that any outstanding

fee payments owed to the government are paid. Under the first

reduced fee provision discussed above in section 6.1, a

manufacturer can receive a conditional certificate for five

vehicles, engines or motorcycles and pay $750 at certification

time and true-up with a report card at the end of the year. 

Manufacturers utilizing the second pathway will not be required to

submit the report card and true-up as required under the first

pathway. 

The initial information that manufacturers submit in the

report card for reduced fees under the first pathway will be

necessary for EPA to establish all of the vehicles made or

imported under each certificate and the fee payments that have

been made by the manufacturer as well as the final reduced fee. 

We agree that audits and information provided on the 3520-8 forms
 15 See EPA docket number OAR-2002-0023 for letter from Jane

Armstrong dated April 14, 1999 to Peter Di Bernardi regarding ICI

owner-imported vehicles and certification.

88

may be helpful to confirm the information submitted by

manufacturers but cannot be solely relied upon for all of the

information submitted in the report card.

6.4 ICI Owner-Imported Vehicles (Not for Resale)

What We Proposed:

We proposed that the cost basis for calculating a reduced fee

for an ICI certification be based upon the full cost of the

vehicle or engine rather than the cost or value of the conversion.

We explained that EPA has not received a fee payment for the “base

vehicle” or the vehicle imported before its conversion to meet

United States’ emissions requirements. For alternative fuel

converted vehicles or engines that have been originally certified

by an OEM, we proposed the reduced fee cost basis as the value

added by the conversion.(67 FR 51412)

What Commenters Said:

 VSC argued that the standard ICI fee should not apply to

owner-imported vehicles. VSC suggested that the fee for ownerimported vehicles (not for resale) should be five percent of the

cost of conversion of the vehicle to meet EPA emission standards. 

VSC cited a letter sent to Mr. Di Bernardi of Liphart & Associates

by Jane Armstrong of EPA (dated April 14, 1999) which discusses a

class of ICI vehicles that are described as owner-imported (not

for resale) and are modified through the installation of OEM parts

to be identical to a certified OEM vehicle sold in the United

States. VSC called these vehicles “Di Bernardi vehicles15.”

According to VSC, EPA would recoup more money under a fee

based on five percent of a conversion of such vehicles than the

one percent cost of conversion rule applicable to alternative fuel

vehicles. VSC stated that the average owner-imported vehicle

conversion costs approximately $8000, and five percent of this

amount would mean a fee of $400. VSC stated that this amount

would be 400 times more than the per-vehicle cost for OEMs. VSC 

further noted a fee based on cost of conversion was appropriate in
89

light of the fact that our certification and compliance activities

for these types of vehicles were limited. 

VSC also stated that EPA was recouping additional fees from

ICIs by requiring ICIs to recertify each year owner-imported

vehicles of a given model year already certified by an ICI for one

MY.

Our Response:

EPA disagrees with the suggestion that fees for

owner-imported vehicles should be only five percent of the cost of

conversion because EPA’s services are limited in these cases as

opposed to an OEM vehicle. We require modification of ownerimported vehicles through installation of OEM parts in order for

these vehicles to be identical to a certified OEM vehicle sold in

the United States. This includes vehicles for resale, and

modification and test vehicles options included in 40 CFR 85.1509

and 40 CFR 89.609 and those imported on behalf of a private or

another owner (not for resale). EPA believes that an

owner-imported vehicle under an engine family/test group certified

by EPA must meet the same emission standards/requirements as

vehicles and engines imported for resale. As a result, each model

year owner-imported and other ICI vehicles are subject to services

such as extensive pre-certification/certification assistance,

application review, processing and approval to ensure that they

meet the certification criteria and allowed final importation.

Other services include recall, maintenance instruction, warranty,

running changes, emissions testing and labeling, and fuel economy

testing and labeling. EPA recoups costs in providing these type of 

MVECP services for these vehicles. 

In addition, EPA addressed in the abovementioned letter to

Mr. Di Bernardi of Liphart & Associates the alternative methods of

compliance demonstration for ICI owner-imported vehicles but did

not grant exemptions for compliance with the standards. 

EPA believes that all ICI vehicles are subject to a standard

fee. If there is an unreasonable economic burden in adhering to

the fees regulations, manufacturers including ICIs may apply for a

reduced fee. Therefore, EPA believes the reduced fee process for

these vehicles and engines is applicable as proposed.

6.5 $300 Minimum Fee Payment

What We Proposed:
90

As part of the proposed reduced fee provision, we proposed a

minimum fee of $300. We believed this amount represented the

lowest level of fee that is cost effective for the Agency to

collect and still representative of the actual costs incurred by

the Agency in providing MVECP services. 

What Commenters Said:

OPEI commented that if the Agency believes (for

administrative reasons) that anything less than $300 is not cost

effective then the certification fee for lawn and garden small

engine families should simply be waived.

Our Response:

The purpose of the fees rulemaking is to recover the costs

for the services that EPA provides to manufacturers. Because EPA

realizes that the costs of the fees may represent an unreasonable

burden for manufacturers of small engine families EPA is adopting

reduced fee provisions (see discussion in section 6) whereby

manufacturers of small engine families will have to pay no more

than one percent of the aggregate retail price of the vehicles or

engines sold under the certificate. To waive the fee completely

is not in keeping with the core purpose of section 217 of the CAA

and the IOAA to recover the costs for the services it provides. 

EPA also believes that the likelihood of such reduced fees

dropping below $300 is very low and in such cases it is still

appropriate to collect such a fee to keep an equitable and level

playing field among those manufacturers that have sales above or

below $300,000 under a certificate ($300 would represent one

percent of $300,000 in that instance).

Section 7: ICI Issues

7.1 Fee Provisions Specific to ICIs

What We Proposed:

We proposed separate and lower fees for ICI light-duty on

highway certificate requests. We examined the costs associated

with ICIs and OEM and found that the costs associated with

administering the light-duty ICI program was lower that the costs

associated with administering the light-duty ICI program was lower

than the costs for light-duty original equipment manufacturers

(OEMs). We proposed a fee of $8,394 for light-duty ICI

certificates with no limit on the number of vehicles to be covered

by the certificate. For all other ICI categories, we explained
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that our certification and compliance activities were no different

for ICIs than OEMs and, therefore, we established the same fees

for ICIs and OEMs. Id. As discussed in section 6.1, above, we

also proposed reduced fee provisions to alleviate any economic

burden imposed by the full standard fee.

What Commenters Said:

VSC suggested that the Agency should promulgate specific fee

provisions for ICIs especially in light of the fact that most of

the services the Agency is seeking to recover the associated costs

are inapplicable to ICIs. As examples, VSC cited the Agency’s

CFEIS system, certification compliance audits, selective

enforcement audits, monitoring of in-use data, review of in-use

testing, or Agency-run in-use or recall tests. VSC also stated

that a multi-part ICI fee system was necessary due to the lack of

similarity between ICI importations.

VSC further stated that ICI specific provisions would still

meet the government’s need to collect fees that offsets its costs,

while taking into account the fact that ICIs are small businesses.

 

Our Response:

Under the certification and compliance program ICIs must meet

certain requirements and the fees reflect the costs incurred in

providing services that assist ICIs in meeting those certification

and compliance requirements. As explained earlier in sections

under 2.4, we grouped the various industries into categories based

on the similarity in the type of services we provide under the

MVECP then separated the categories into subcategories if the

levels of service within a category differed as is the case with

light-duty vehicles, motorcycles and ICIs within the Light-duty

category (worksheet #2.) 

ICIs do not receive all of the services that are provided to

the light-duty subcategory. As pointed out by VSC, ICIs do not

use CFEIS, receive selective enforcement audits or services that

involve in-use testing. The fees for ICIs do not include the

costs of these services. That is why the fees for ICIs are lower

than the fees for the LD manufacturers. ICIs fees include the

cost of providing the services of certification and fuel economy

testing, extensive assistance with pre-certification activities,

application preparation and application review.
 16EPA Form 3520-1, known as the Declaration Form, is called the

Importation of Motor Vehicles and Motor Vehicle Engines Subject to

Federal Air Pollution Regulations form. This form is collected

by customs to ensure that motor vehicles and engines imported into

the U.S. conform with applicable emission requirements. Code A

is described under the Independent Commercial Importer (ICI)

Imports section of the form as any vehicle or engine imported by

an ICI for modifications in accordance with a valid EPA

certificate of conformity issued for the specific make, model, and

model year in accordance with 40 CFR 85.1505.

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In addition, EPA believes no multi-part fee system is

necessary for the various ICI importations because of the

complexity of the vehicle models, ages, and types of ICI work

performed on ICI vehicles and engines. Furthermore, the reduced

fee provisions allows some flexibility and adjustments in fees for

ICIs and other manufacturers.

The EPA believes that this fee adequately reflects the time,

labor and expenses spent on ICI pre-certification and

certification activities. ICI certification process is very time

and resource intensive yet as a category ICIs request less

certificates and cover fewer vehicles per certificate than OEMs or

industry categories. 

7.2 ICI Vehicles Imported for Resale

What We Proposed:

EPA proposed a fee of $8,394 for light-duty ICI certificates

as EPA has determined that this recovers the costs of MVECP

services provided.

What Commenters Said:

VSC argued that this fee of $8,394 should be applicable to

only ICI cars imported for resale under Declaration A on EPA form

3520-1.16

Our Response:

We disagree with this comment. The EPA believes that the ICI

fee applies to all ICI certificates. This includes certificates

that cover vehicles and engines for sale, vehicles and engines

not for sale (i.e., owner-imported) and those modified under the
 17Currently, EPA Form 3520-1 contains codes A, C, J, and Z under

the ICI section. These codes describe the type of vehicles that

are imported. EPA believes the vehicles imported under a

certificate does not only include code A, certification vehicles

and code J, pre-certification test vehicles. It also includes

code C, modification and test vehicles and code Z, vehicles that

are modified to be identical to an OEM with permission. This does

not include vehicles or engines that may be excluded or exempted

by the Administrator per section 203 of the CAA and/or U.S.

customs.

 18 Imported vehicles are described by codes selected on the EPA

Form 3520-1. Code “C” which is listed under the ICI imports

category means that the vehicle is being imported by an ICI for

modification and testing in accordance with 40CFR § 85.1509. Such

vehicles or heavy-duty engine must be at least 6 years old. 

93

modification and test provisions. Therefore the standard fee is

applicable to each certificate that covers these types of ICI

importations. EPA believes the type of vehicles ICIs should pay

fees for are also specified on the EPA Declaration form 3520-1.17

7.3 Modification and Test Cars

What We Proposed:

 The proposed reduced fees provision required inclusion of all

vehicles sold by a manufacturer in the aggregate retail price, 67

FR 51411. EPA proposed that when calculating the aggregate retail

sales price of vehicles or engines under the reduced fee

provisions, such calculation must not only include vehicles and

engines actually sold by the ICI but also those modified under the

modification and test options in 40 CFR 85.1509 and 40 CFR 89.609

and those imported on behalf of a private or another owner, 67 FR

51412.

What Commenters Said:

Section 7.3.1. VSC argues that EPA recognized the “Mod and Test”

procedure as an alternative to the full certification procedure

for modification and test vehicles (also known as Declaration ‘C’

cars)18, in the 1987 ICI Rule, and stated that this was a “clear

reason” why the fees rule should not be applicable to such

vehicles. VSC also stated that the process applicable to

modification and test cars should not even be called
94

“certification.” In addition, VSC argued that EPA had failed to

justify the combination of modification and test cars with other

ICI imports since the Agency’s regulations treat them differently. 

VSC further stated that the fact that these vehicles have

historically been included in the fee regulation was insufficient

to justify their continued inclusion.

Our Response:

We disagree with this comment. We believe that ICI

modification and test vehicles must meet the applicable emissions

standards and undergo the certification process. As certificate

holders, ICIs are required to perform all of the necessary

modifications and emissions testing to ensure the vehicles they

import comply to EPA emissions standards and requirements. Under

EPA’s import regulations, modification and test cars must be

covered by a certificate (unless otherwise exempted by the EPA

Administrator or Customs). Furthermore, Section 206 of the CAA

allows the EPA Administrator to test any emission control system

incorporated in a motor vehicle or engine to determine whether

such system enables the vehicle or engine to conform to the

required emission standards. In addition, a certificate of

conformity may be issued under this section only if the

Administrator determines that the importer (or any person) has

established to the satisfaction of the Administrator that any

emission control device, system or element installed on or

incorporated in such vehicle or engine conforms to the emission

requirements. Section 217 of the Act and the IOAA authorize EPA

to recover the costs of compliance and certification services it

provides to manufacturers. Hence, we believe ICIs must pay fees

that represent the costs involved in assuring that modification

and test cars meet emission standards. 

The 1987 Rule for Importation of Noncomforming Motor Vehicles

and Motor Vehicle Engines (52 FR 36136, September 25, 1987) that

VSC mentioned provides a more enhanced modification and test

program in part due to previous noncompliance issues. As a

result, these vehicles have been historically included in the fee

regulation because they are imported under a certification-based

program. Being certificate holders makes ICIs responsible for

complying with all the emission requirements for these vehicles

which may or may not be owned by the certificate holder.

We agree with VSC that EPA has allowed alternative methods of

compliance demonstration for ICIs (that meet certain criteria)

however they are required to comply with applicable emission
 19Form 3520-1, EPA Declaration Form has codes describing the

types of vehicles and engines that are to be imported into the

U.S. that must be declared by the manufacturer. 

Codes “Z” listed under the ICI imports category means

imported by an ICI for the purpose of modifying to be identical to

an original equipment manufacturer (OEM) certified version in

accordance with written instructions from the OEM that are

specific to the vehicle or heavy-duty engine being imported. 

 Codes “E” and “M” fall under the EPA exempted vehicles

category and mean vehicle or engine at least 21 years old and

Canadian vehicle/miscellaneous exemption, respectfully. 

 Codes “B” and “EE” fall under the U.S. conforming and

“identical” vehicles category. 

More specifically, code “B” indicates that the vehicle is U.S.

certified and is unmodified bearing a U.S. EPA emission control

label in the engine compartment or motorcycle frame in English. 

95

standards and to properly install required emission related

components that are fully functional. By requiring ICIs to adhere

to the test/modification provisions while undergoing the

certification process ensures that this happens.

ICI vehicles or engine certificates cover vehicles or engines

which are imported into U.S. but was not originally certified by

an OEM. EPA recovers costs associated with providing various

MVECP services to ensure that these vehicles and engines meet

emission requirements. These requirements include meeting

emission standards, and also include undergoing recall,

maintenance instruction, warranty, running changes, emissions

testing and labeling, and fuel economy testing and labeling which

are the same requirements with which light-duty OEMs are required

to comply. In addition, ICIs receive extensive assistance with

pre-certification activities, application preparation and

application review. The EPA import team reviews numerous

applications for import exemptions due to hardship or other forms

of exemptions. EPA incurs costs for conducting these types of

services. Therefore, we believe ICIs must pay fees that represent

the costs involved in assuring that modification and test cars

meet emission standards. 

What Commenters Said:

Section 7.3.2. VSC also commented that vehicles declared on EPA’s

Declaration Form 3520-1 under categories “Z” “E”, “M”, “EE”, and

“B”19 should likewise not have to pay any fee. They asserted that
Code “EE” indicates that the vehicle is identical in all material

respects to a U.S. certified version either as a Canadian vehicle

(with the proper Canadian emission control label and other

customs-EPA requirements as listed on form 3520-1), or as a

vehicle from any country (requiring a letter from the

manufacturer’s U.S. representative (not dealer or mechanic) on

letterhead stating the vehicle is identical to a U.S. EPA

certified version with respect to emissions, is not being imported

for resale or lease, and other requirements as listed on form

3520-1).

96

EPA has not established that it has any costs to recoup in regard

to these vehicles.

Our Response:

EPA disagrees with this comment. Under EPA’s import

regulations, including section 203 of the CAA these vehicles may

not be imported into the U.S. unless covered under a certificate

of conformity, exempted by the Administrator or otherwise

authorized by EPA and U.S. Customs Service regulations. Based on

the EPA Declaration form 3520-1 codes “E” and “M” fall under the

exemption category. Although the vehicles imported under the

exemption category must meet certain government requirements, we

agree that certification fee costs currently do not apply to these

vehicles. In addition, certification fees currently do not apply

to vehicles indicated as codes “B” and “EE” on Declaration form

3520-1. The codes “B” and “EE” fall under the U.S. conforming and

“identical” vehicles category and cover vehicles that are required

to conform to EPA emissions standards. Proof must be provided to

Customs that these vehicles comply as indicated on the Declaration

form 3520-1. Furthermore, the “Z” code indicates that the vehicle

or engine is imported by an ICI for the purpose of modifying it to

be identical to an OEM certified version (with written OEM

instructions) and this requires undergoing the certification

process and submitting a fee payment. Currently, EPA Form 3520-1

contains codes A, C, J, and Z under the ICI section. These codes

describe the type of vehicles that are generally imported by ICIs. 

EPA believes the vehicles imported under a certificate does not

only include code A, certification vehicles and code J, precertification test vehicles. It also includes code C, 

modification and test vehicles and code Z, vehicles that are

modified to be identical to an OEM with permission. Under these

ICI categories vehicles and engines for resale, modification and

test vehicles and engines, or owner-imported vehicles (not for
97

resale) must undergo the certification process and therefore, pay

fees, as discussed earlier in the response to section 7.2 above.

7.4 ICI Licensing

What We Proposed:

ICI licensing was not proposed in the NPRM.

What Commenters Said:

VSC suggested that EPA offer through the fees program an ICI

license that is renewed annually, similar to the National Highway

Traffic Safety Administration (NHTSA) Registered Importer program. 

VSC further stated that in addition to raising revenue, an ICI

licensing program will provide a control on companies seeking to

become ICIs.

Our Response:

This comment is beyond the scope of this rulemaking.

7.5 ICIs and SBREFA

What We Proposed:

 In section VIII.B. of the proposed rule we certified our

proposed fees as having no significant economic impacts on small

entities. In addition, we also stated that our reduced fee

provisions would limit the impacts of this rule on small entities.

(Section VIII.B., Regulatory Flexibility Act (RFA), as amended by

the Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA), 5 U.S.C. 601 et seq. (67 FR 51414).

What Commenters Said:

Section 7.5.1. VSC stated that the Regulatory Flexibility Act, 5

U.S.C. 601-612 was amended by SBREFA, Public Law 104-121, to

ensure that concerns regarding small entities are adequately

considered during the development of new regulations that affect

them. VSC further quoted the SBREFA amendments in which Congress

stated that "uniform Federal regulatory * * * requirements have in

numerous instances imposed unnecessary and disproportionately

burdensome demands including legal, accounting, and consulting

costs upon small businesses * * * with limited resources[,]" and
98

directed agencies to consider the impacts of certain actions on

small entities.

VSC suggested that EPA consider two points: (1) “the

significant economic impact the proposed rule has on small

entities; and (2) any significant alternatives to the proposed

rule which would ensure that the objectives of the proposal were

accomplished while minimizing the economic impact of the proposed

rule on small entities and providing relief to small certifiers of

vehicles.”

Our Response:

We are committed to minimizing the burden of the fees

regulations on small entities or entities with small engine

families to the extent feasible while still meeting the statutory

requirements to charge fees. The Agency did consider the economic

impacts of this rule on small entities, however, we believe this

rule will not have a significant economic impact on a substantial

number of small entities. We reviewed the rulemakings that set

emission standards for the industries affected by the fees rule,

including those manufacturers affected by the recreational vehicle

rule. The review showed that approximately 108 small businesses

will be paying fees. The Agency examined the cost of the fees and

determined that the average cost for manufacturers of all sizes,

across industry sectors, is approximately $.41 per vehicle or

engine.

Nevertheless, to mitigate possible economic hardship EPA is

adopting an alternative to the full certification fee requirement

including reduced fee provisions to help small volume entities

meet the regulations while ensuring the fees rule objectives can

be accomplished. The reduced fee provisions limits the impact of

this rule on small entities to one percent of the aggregate retail

sales price of the vehicles or engines covered by a certification

request. Hence, the fee a manufacturer would pay will not exceed

one percent of the aggregate retail sales price of the vehicles or

engines covered by a certificate. This one percent amount

represents a modest cost of doing business. EPA also believes

enough notification of this fees rule was provided to allow

manufacturers enough time to plan for fees in their budgets.

What Commenters Said:

Section 7.5.2. VSC suggested that EPA should recognize that ICIs

are not OEMs. VSC further stated that SBREFA requires this
99

distinction and also compels EPA to adopt a fee system that

carefully considers ICIs’ and how they differ from OEMs. VSC

requested that we consider and include “the fact” that ICIs are

small businesses that, on the average, import fewer than 100

vehicles annually.

Our Response:

 EPA believes that although ICI manufacturers are often small

businesses and in some instances may differ from OEMs, both ICIs

and OEMs are certificate holders. As certificate holders, ICIs

are required to meet certain certification and compliance

requirements. These requirements include meeting emission

standards, and also include undergoing recall, maintenance

instruction, warranty, running changes, emissions testing and

labeling, and fuel economy testing and labeling which are the same

requirements that light-duty OEMs are required to comply to. EPA

incurs costs for conducting these types of services. 

Under the ICI category of the cost study, we have calculated

fees only for the services applicable to ICIs and thus, ICI

certificates cost considerably less than certificates for other

vehicle manufacturers. EPA also believes that the reduced fees

provision, while enabling the objectives of both section 217 and

the IOAA to be met, minimizes the economic impact of this rule on

small entities or entities with small engine families.

Section 8: Other Topics

8.1 EPA Services

What We Proposed:

As previously mentioned in sections 2 and 3, our proposed

fees were based on the costs the Agency incurs in providing

certification and compliance services to the various certification

groups.

What Commenters Said:

Mercury Marine stated that the office that handles marine SI

certification and compliance was understaffed and required follow

up calls to encourage timely processing of applications. Mercury

Marine sought an explanation from EPA as to how fees would be used

to improve the level of service, or more specifically, to improve

the processing of requests in a timely fashion.
100

Our Response:

 The fees schedule is based on the type of services provided

to each category as well as the amount of services that each

category receives. It is also based on the current and projected

costs for each industry. The projected costs for the “Other”

category does include the cost of additional personnel to assist

in processing applications. EPA will continue to ensure the

timely processing of applications.

8.2 Fee Payment Timing

What We Proposed:

EPA proposed that fees must be paid in advance of receiving a

certificate (67 FR 51410). We also emphasized that the Agency

would not process applications until the appropriate fees had been

fully paid. (67 FR 51411).

What Commenters Said:

Three commenters suggested that the Agency should not require

fees payment prior to issuing certificates.

Our Response:

In most instances, we begin reviewing certification

applications and, in some cases, complete our review, prior to

receiving fees payment. Thus, we do not necessarily suspend

application review because of non payment of fees. However,

because we cannot issue a certificate of conformity before receipt

of fees, we are maintaining the requirement that fees be paid in

advance of submitting an application for certification. We

believe this will ensure that we do not delay the issuance of

certificates.

8.3 Running Changes and Carryovers

What We Proposed:

We did not propose any special provisions for running changes

and carryover applications.

What Commenters Said:
101

Sierra Research noted that the Agency did not propose any

provisions for running changes and requested clarification that

running change were not certification requests and therefore,

would not trigger fees. 

OPEI suggested that certification for lawn and garden engines

be set at no more than $300 since most certificate applications

for this category were carryover applications, which generally

costs less time and effort to process as compared to new

certification applications.

Our Response:

We are responding for purposes of providing information only. 

Running changes are those changes in a vehicle or engine

configuration, equipment or calibration which are made by an OEM

or ICI in the course of a motor vehicle or engine production. The

cost of a running change is included in the fees cost for an

engine family or test group within the same engine-emissions

control system combination. Therefore, they do not trigger

additional fees.

Carryover applications are certification applications that

use data from a prior year’s application. When a manufacturer

elects to carry over test data from a previous model year, its

certification effort may be reduced. Further, such carryover test

data may reduce some of our efforts. However, such potential

reductions are offset by additional activities necessitated by the

carryover request. The application for a carryover is usually not

an exact duplicate of the MY being carried over. For example,

carryover applications may involve changes (e.g. additional test

weight and horsepower) which could change the test vehicle or

engine selection. In such cases, EPA must conduct additional

review of carryover requests to ensure that they meet EPA

requirements and that the test vehicles or engines were properly

selected for the carryover application. Further, EPA must review

a carryover application to determine the applicability for the

regulations for the new model year as compared to the carryover

model year. Thus, carryover applications do not necessarily

result in lower costs than a certification request for a new

engine family/test group. As a result, the fee schedule will

remain as proposed. Carryover certification requests will not be

distinguished from new certification requests.

8.4 Refunds Less than $500 and Final Fee Payments Less than

$500
102

What We Proposed:

For applicants who fail to obtain certificates and who

subsequently request refunds, we proposed full fee refunds of

amounts exceeding $500. This was a change from the existing

requirement that allowed for partial refunds when applicants fail

to obtain a signed certificate (see 40 CFR §86.908-93(b)(1), as

amended by §86.908-01(b)(1)). We also proposed the option of

applying the refund to another certification request. 

Further, we proposed the continuation of the existing

requirement of providing partial refunds resulting from decreases

in the aggregate projected retail sales price of vehicles or

engines covered by the certification request. (See, 40 CFR §

86.908-93(b)(2) and 86.908-01(b)(2)). We also invited comments on

whether to limit refund requests to $500. (67 FR 51412).

As earlier discussed in section 6 above, we proposed a

reduced fee provision that includes calculating a final reduced

fee within 30 days of the end of the model year and “true-up” of

any additional fees owed within 45 days of the end of the model

year. Under the 1992 fees rule reduced fee applicants pay an

additional waiver fee any time the aggregate projected retail

sales price of the vehicles or engines to be covered by a

certification request changes. Also, there was no minimum amount

due before payment was required. (See, 40 CFR §86.908-93(a)(5)).

What Commenters Said:

EMA supported our proposal to allow manufacturers request a

full refund in cases where a certificate is not issued. EMA

suggested that 40 CFR § 85.2407(a) should read “may,” instead of 

“shall.” EMA suggested that we clarify that manufacturers are

entitled to a full refund regardless of the reason for nonissuance of a certificate. 

EMA suggested that 40 CFR § 85.2407(b) should read “shall”

instead of “may.” EMA also suggested that refunds should be

predicated upon a decrease in “actual” rather than “projected”

sales prices.

EMA further objected to proposed 40 CFR § 85.2407(b)(3) and

(b)(4)(vi) and argued that manufacturers should be entitled to any

and all refunds regardless of the amount.

Our Response:
103

EPA agrees with EMA’s comment regarding refund language. 

Regulatory language has been amended to reflect these changes in

40 CFR § 85.2405(a) and (b). Upon request from a manufacturer EPA

will refund fees. This includes instances of overpayment, when

the manufacturer withdraws an application or when EPA denies a

certificate as well as any other circumstances that would lead to

a certificate not being issued. Also, 40 CFR § 85.2407(a) and (b)

have been changed to read: 

(a) Full Refund. The Administrator shall refund the

total fee imposed by 85.2405 if the applicant fails to

obtain a certificate, for any reason, and requests a

refund.

(b) Partial Refund. The Administrator shall refund a

portion of a reduced fee, paid under 85.2406, due to a

decrease in the aggregate projected or actual retail sales

price of the vehicles or engines covered by the

certification request.

However, we disagree with the comment that refunds should be

predicated on the decrease in the aggregate “actual” price rather

than the aggregate “projected” price. This is because not all of

the vehicles or engines would have been sold and the actual price

may not be available at the time of the refund request therefore

we have revised the regulatory language to indicate projected or

actual price. The manufacturer should use whichever is more

accurate.

EPA agrees that it should not limit refunds to $500 minimum.

Therefore EPA is not adopting proposed §85.2407(b)(3) and

(b)(4)(vi). However, the rationale behind EPA’s proposal that

manufacturers should not be required to pay a “true-up” payment of

less than $500 was balanced out by the proposal that refunds would

be limited to amounts of $500 or more. We believed that the

amounts not paid in refunds would equal the payments not received

for “true-up.” Therefore, since EPA will be paying full refunds,

EPA is setting forth in today’s rule that full payment must be

submitted at true-up to avoid an overall deficit in its recovery

of MVECP costs and to continue to abide by the intent of the IOAA

and CAA.

8.5 Reduced Costs for California-only

What We Proposed:
104

EPA proposed a separate California-only fee for only the

light-duty and heavy-duty fee categories. No California-only fee

was proposed for the motorcycle, ICI, Nonroad CI and Other

categories because EPA’s responsibilities for vehicles and engines

are not decreased even though certification is only requested for

the State of California. 

What Commenters Said:

One commenter argued that our proposed fees for Californiaonly certificates was inappropriate since the Agency did not

provide any benefits to manufacturers. 

Echo stated that the “Other” category should have reduced

fees for California-only families because other categories have

reduced fees for California-only. Echo stated that the full fees

for these families cannot be justified and that EPA should not

charge for service not provided. Echo also observed that the CARB

may decided to add its own fees further raising the cost to

manufacturers.

OPEI commented that EPA should not impose certification fees

on California-only engine families that are not sold outside of

California. OPEI questioned the utility of requiring this dual

certification burden. The commenter further argued that the

proposed fees should be waived since California-only engine

families are sold only in California, and as a result, do not

generate national sales revenue. OPEI, further requested that the

certification fee be waived with respect to California-only engine

families. 

Our Response:

 The Clean Air Act requires that vehicles sold in the United

States to be covered by a federal certificate of conformity

including those sold in California. The EPA receives applications

and certifies all vehicles and engines sold in the US. The EPA

review and testing required for California-only certification, and

therefore the benefits received, are no less than that required

for other certificates. Test results generated by EPA from

certification tests of these vehicles and engines are shared with

the CARB to assist in its certification process. However, the

California-only fee is less than the standard fee because EPA does

not incur the cost of the in-use program. The CARB conducts an

in-use program for these categories, but at this time EPA does

not. Thus the fee for California-only certificates for light-duty
105

and heavy-duty vehicles and engines reflects the EPA costs in the

certification component of the MVECP.

As noted above in the section discussing the adjustment of

fees to reflect future inflation costs, EPA has taken the

additional step for manufacturers certifying light-duty vehicles

that will only be sold in California (“California-only” vehicles)

by only adjusting the “certification/FE” costs for inflation and

not applying an adjustment for light-duty in-use costs.

In the case of engines and vehicles in the “Other” category,

EPA is assessing the costs of the certification and minimal

testing services that it provides. A lower California-only fee is

not offered as EPA’s work is not decreased by compliance work done

by the CARB.

OPEI stated that no national sales revenue is generated to

absorb the cost of the fee, however, because EPA reviews the

certificate applications and the manufacturer receives benefit

from receiving a certificate, EPA should recover the costs of

providing this service as directed by the CAA and the IOAA. 

8.6 Fee Payment Suggestions

What We Proposed:

We invited comments on methods of streamlining the fee

payment process while still maintaining the requirement that fees

be paid in advance of certification services. (67 FR 51411).

What Commenters Said:

One commenter suggested that EPA allow manufacturers to

submit fees for “undesignated” families. This commenter noted

that as long as prepaid funds existed for a given manufacturer,

fee payments for specific families could be designated when the

manufacturer subsequently submitted an application.

In addition, the commenter suggested that EPA modify the fee

filing form by deleting the requirement for manufacturers to

specify family names at the time of fee submission. 

Our Response:

EPA believes the process of collecting and tracking fee

payments by engine families or test groups has been very
106

effective. This process has been especially useful for handling

fee refunds and other transactions. However, EPA is also

exploring other ways to collect, track and process fee payments. 

As suggested, we are now looking at other ways manufacturers can

submit up-front fee deposits for undesignated families. We

anticipate that in such instances, manufacturers should be able to

draw from this deposit to pay for engine families or test groups

perhaps designated later in the model year or for which

certification applications are submitted. Prior to the effective

date of this rule, we are planning to issue a manufacturers’

guidance letter describing how to submit fee payments and conduct

other fee transactions.

In addition, we are exploring the idea of a banking or

accounting system to handle fee payments and transactions. If

utilized, a banking or an accounting mechanism would be useful in

streamlining the fee collection process and other transactions. 

EPA may explore how this accounting system would work for future

fee adjustments.